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: | 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.