Publication Type

Journal Article

Publication Date

2006

Abstract

This paper investigates the optimality of intertemporal price discrimination for a durable-good monopoly in a model where infinitely-lived households face an intertemporal budget constraint, and consume both durable goods and non-durable goods. We prove that the optimal price of the durable good is not constant, and may decrease or increase over time. Some households may choose to purchase the durable good at a later date, and pay lower or higher prices, since the gain in discounted utility of consuming more of the non-durable good more than compensates for the loss in utility from delaying the consumption of the durable good. [ABSTRACT FROM AUTHOR]

Keywords

Intertemporal price discrimination, Durable good monopoly, Optimal pricing strategy, Household demand

Discipline

Economic Theory | Finance

Research Areas

Economic Theory

Publication

Economic Theory

Volume

27

Issue

2

First Page

393

Last Page

410

ISSN

0938-2259

Identifier

10.1007/s00199-005-0599-4

Publisher

Springer Verlag

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://dx.doi.org/10.1007/s00199-005-0599-4

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