Dynamic Monopoly Pricing With Multiple Varieties: Trading Up
Series
Discussion Papers
Type
working paper
Date Issued
2021-12
Author(s)
Abstract
This paper studies dynamic monopoly pricing for a class of settings that includes multiple durable, multiple rental, or a mix of varieties. We show that the driving force behind pricing dynamics is the seller’s incentive to switch consumers—buyers and non-buyers—to higher-valued consumption options by lowering prices (“trading up”). If consumers cannot be traded up from the static optimal allocation, pricing dynamics do not emerge in equilibrium. If consumers can be traded up, pricing dynamics arise until all trading-up opportunities are exhausted. We study the conditions under which pricing dynamics end in finite time and characterize the final prices at which dynamics end.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Publisher
SEPS
Publisher place
University of St.Gallen, Department of Economics
Pages
43
Subject(s)
Eprints ID
265422
File(s)![Thumbnail Image]()
open.access
Name
Buehler-Eschenbaum(2021, WP).pdf
Size
369 KB
Format
Adobe PDF
Checksum (MD5)
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