Intertemporal Price Discrimination with Two Products
34 Pages Posted: 15 May 2017 Last revised: 7 May 2019
There are 2 versions of this paper
Intertemporal Price Discrimination with Multiple Products
Date Written: May 2017
Abstract
We study the two-product monopoly profit maximisation problem for a seller who can commit to a dynamic pricing strategy. We show that if consumers' valuations are not strongly-ordered then optimality for the seller can require intertemporal price discrimination: the seller offers a choice between supplying a complete bundle now, or delaying the supply of a component of that bundle until a later date. For general valuations we establish a sufficient condition for such dynamic pricing to be more profitable than mixed bundling. So we show that the Stokey (1979) no-discrimination-across-time result does not extend to two-product sellers when consumers' valuations are drawn from many standard distributions.
Keywords: Bundling, Cross-sell, Multidimensional Mechanism Design, second degree price discrimination, Substitutes and Complements, Time Discounting
JEL Classification: D42, L11
Suggested Citation: Suggested Citation