Advance-purchase discounts as a price discrimination device

A-Tier
Journal: Journal of Economic Theory
Year: 2011
Volume: 146
Issue: 1
Pages: 141-162

Score contribution per author:

1.341 = (α=2.01 / 3 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

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 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 characterize the profit-maximizing pricing strategy of the monopolist. Furthermore, adopting a mechanism design perspective, we provide a necessary and sufficient condition under which advance-purchase discounts implement the monopolist's optimal mechanism.

Technical Details

RePEc Handle
repec:eee:jetheo:v:146:y:2011:i:1:p:141-162
Journal Field
Theory
Author Count
3
Added to Database
2026-01-26