This paper examines the optimality of intertemporal price discrimination when network externality effects are present in the consumption of a durable good. We conduct our study in two settings. In a model with two household types, utilities are dependent on the cumulative proportion of households that have purchased the durable good. Next, in a model with a continuum of household types, we extend the analysis to the case where households consume both a durable good and a stream of non-durable goods. We show that in both settings, the presence of network externalities facilitates a sales strategy with intertemporal price discrimination.
intertemporal price discrimination, durable good, household demand, network externality
Koh, Winston T. H..
Household Demand, Network Externality Effects and Intertemporal Price Discrimination. (2005). Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/824
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