Working Paper: CEPR ID: DP6664
Authors: Volker Nocke; Martin Peitz
Abstract: In an intertemporal setting in which individual uncertainty is resolved over time, advance-purchase discounts can serve to price discriminate between consumers with different expected valuations for the same product. Consumers with a high expected valuation purchase the product before learning their actual valuation at the offered advance-purchase discount; consumers with a low expected valuation will wait and purchase the good at the regular price only in the event where their realized valuation is high. We provide a necessary and sufficient condition under which the monopolist's optimal intertemporal selling policy features such advance-purchase discounts.
Keywords: advance-purchase discount; demand uncertainty; intertemporal pricing; introductory offers; monopoly pricing; price discrimination
JEL Codes: D42; L12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| advance-purchase discounts (M31) | consumer purchasing behavior (D19) |
| expected valuation (D46) | purchasing decision (M31) |
| monopolist's pricing strategy (D42) | advance-purchase discounts (M31) |
| high expected valuations (G19) | early purchase (G14) |
| low expected valuations (G19) | delayed purchase (D15) |