Document Type
Discussion Paper
Publication Date
6-1-2018
CFDP Number
2136R4
CFDP Revision Date
11-8-2021
CFDP Pages
50
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, we show that inventory controls are also a tool to soften price competition. We 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. 2660.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2660