Citation

Discussion Paper Details

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Title: Advance-Purchase Discounts as a Price Discrimination Device

Author(s): Volker Nocke and Martin Peitz

Publication Date: January 2008

Keyword(s): advance-purchase discount, demand uncertainty, intertemporal pricing, introductory offers, monopoly pricing and price discrimination

Programme Area(s): Industrial Organization

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 same 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 provide a necessary and sufficient condition under which the monopolist's optimal intertemporal selling policy features such advance-purchase discounts.

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Bibliographic Reference

Nocke, V and Peitz, M. 2008. 'Advance-Purchase Discounts as a Price Discrimination Device'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6664