DP7315 A Dynamic Model of Price Discrimination and Inventory Management at the Fulton Fish Market
|Author(s):||Kathryn Graddy, George Hall|
|Publication Date:||June 2009|
|Keyword(s):||dynamic programming, fish, indirect inference, price discrimination, yield management|
|JEL(s):||C15, D21, D4, L1, L81|
|Programme Areas:||Industrial Organization|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=7315|
We estimate a dynamic profit-maximization model of a fish wholesaler who can observe consumer characteristics, set individual prices, and thus engage in third-degree price discrimination. Simulated prices and quantities from the model exhibit the key features observed in a set of high quality transaction-level data on fish sales collected at the Fulton fish market. The model’s predictions are then compared to the case in which the dealer must post a single price to all customers. We find the cost to the dealer of posting a uniform price to be extremely small.