Intertemporal price discrimination in storable goods markets

Igal Hendel, Aviv Nevo*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

52 Scopus citations

Abstract

We study intertemporal price discrimination when consumers can store for future consumption needs. We offer a simple model of demand dynamics, which we estimate using market-level data. Optimal pricing involves temporary price reductions that enable sellers to discriminate between price sensitive consumers, who stockpile for future consumption, and less price-sensitive consumers, who do not stockpile. We empirically quantify the impact of intertemporal price discrimination on profits and welfare. We find that sales (i ) capture 25-30 percent of the gap between non-discriminatory profits and (unattainable) third-degree price discrimination profits, (ii ) increase total welfare, and (iii) have a modest impact on consumer welfare.

Original languageEnglish (US)
Pages (from-to)2722-2751
Number of pages30
JournalAmerican Economic Review
Volume103
Issue number7
DOIs
StatePublished - Dec 2013

ASJC Scopus subject areas

  • Economics and Econometrics

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