Advance-purchase discounts as a price discrimination device

Advance-purchase discounts as a price discrimination device,10.1016/j.jet.2010.07.008,Journal of Economic Theory,Volker Nocke,Martin Peitz,Frank Rosar

Advance-purchase discounts as a price discrimination device  
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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 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 characterize the profit-maximizing pricing strategy of the monopolist. Furthermore, adopting a mechanism design perspective, we provide a necessary and sufficient condition under which advance-purchase discounts implement the monopolist's optimal mechanism.
Journal: Journal of Economic Theory - J ECON THEOR , vol. 146, no. 1, pp. 141-162, 2011
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