Intertemporal Price Discrimination with Two Products

34 Pages Posted: 15 May 2017 Last revised: 7 May 2019

See all articles by Jean-Charles Rochet

Jean-Charles Rochet

University of Toulouse Capitole - Toulouse School of Economics

John E. Thanassoulis

University of Warwick - Warwick Business School; UK Competition and Markets Authority; Oxford-Man Institute, University of Oxford

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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

Rochet, Jean-Charles and Thanassoulis, John E., Intertemporal Price Discrimination with Two Products (May 2017). CEPR Discussion Paper No. DP12034, Available at SSRN: https://ssrn.com/abstract=2968375

Jean-Charles Rochet (Contact Author)

University of Toulouse Capitole - Toulouse School of Economics ( email )

Toulouse
France

John E. Thanassoulis

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

HOME PAGE: http://https://sites.google.com/site/thanassoulis/

UK Competition and Markets Authority ( email )

Victoria House
37 Southampton Row
London, WC1B 4AD
United Kingdom

Oxford-Man Institute, University of Oxford ( email )

Eagle House
Walton Well Road
Oxford, Oxfordshire OX2 6ED
United Kingdom

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