Working Paper: NBER ID: w15019
Authors: Kathryn Graddy; George Hall
Abstract: We estimate a dynamic profit-maximization model of a fish wholesaler who can observe consumer characteristics, set individual prices, and thus engage in third-degree price discrimination. Simulated prices and quantities from the model exhibit the key features observed in a set of high quality transaction-level data on fish sales collected at the Fulton fish market. The model's predictions are then compared to the case in which the dealer must post a single price to all customers. We find the cost to the dealer of posting a uniform price to be extremely small.
Keywords: price discrimination; inventory management; fish market; dynamic model
JEL Codes: D21; D4; L1; L81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| price discrimination (D40) | higher revenues (H27) |
| white customers (J79) | larger quantities and more frequent purchases (D12) |
| more price-elastic Asian customers (F61) | pay higher prices and purchase less (D12) |
| seller's ability to observe customer types (D16) | set prices accordingly (L11) |
| set prices accordingly (L11) | affect quantities sold (C69) |
| affect quantities sold (C69) | overall revenue (H27) |