CFDP Revision Date
September 2018, March 2019, February 2020
Journal of Economic Literature (JEL) Code(s)
D21, D43, L13
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 that when the elasticity of demand falls across periods, strong competitive forces prevent ﬁrms from utilizing intertemporal price discrimination. We then enrich the model by allowing ﬁrms to use inventory controls, or sales limits assigned to individual prices. We show that competing ﬁrms can proﬁtably use inventory controls. Thus, although typically viewed as a tool to manage demand uncertainty, we show that inventory controls can also facilitate price discrimination in oligopoly.
Dana, James D. Jr. and Williams, Kevin R., "Intertemporal Price Discrimination in Sequential Quantity-Price Games" (2018). Cowles Foundation Discussion Papers. 132.