DP12034 Intertemporal Price Discrimination with Two Products
|Author(s):||Jean-Charles Rochet, John Thanassoulis|
|Publication Date:||May 2017|
|Date Revised:||May 2019|
|Keyword(s):||Bundling, Cross-sell, Multidimensional Mechanism Design, second degree price discrimination, Substitutes and Complements, Time Discounting|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=12034|
We study the two-product monopoly profit maximisation problem for a seller who can commit to a dynamic pricing strategy. We show that if consumers' valuations are not strongly-ordered then optimality for the seller can require intertemporal price discrimination: the seller offers a choice between supplying a complete bundle now, or delaying the supply of a component of that bundle until a later date. For general valuations we establish a sufficient condition for such dynamic pricing to be more profitable than mixed bundling. So we show that the Stokey (1979) no-discrimination-across-time result does not extend to two-product sellers when consumers' valuations are drawn from many standard distributions.