Document Type
Discussion Paper
Publication Date
6-1-2018
CFDP Number
2136R3
CFDP Revision Date
September 2018, March 2019, February 2020
CFDP Update Date
7-20-2021
CFDP Pages
45
Journal of Economic Literature (JEL) Code(s)
D21, D43, L13
Abstract
This paper develops an oligopoly model in which firms first choose capacity and then compete in prices in a series of advance-purchase markets. We show the existence of multiple sales opportunities creates strong competitive forces that prevent firms from utilizing intertemporal price discrimination. We then show that intertemporal price discrimination is possible, but only when firms adopt inventory controls (sales limit restrictions) and demand becomes more inelastic over time. Therefore, in addition to being useful to manage demand uncertainty, inventory controls are also a tool to soften price competition. We also discuss model extensions, including product differentiation, aggregate demand uncertainty, and longer sales horizons.
Recommended Citation
Dana, James D. Jr. and Williams, Kevin R., "Intertemporal Price Discrimination in Sequential Quantity-Price Games" (2018). Cowles Foundation Discussion Papers. 132.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/132