Household Demand, Network Externality Effects and Intertemporal Price Discrimination |
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Authors: | Winston T H Koh |
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Institution: | (1) School of Economics and Social Sciences, Singapore Management University, 469 Bukit Timah Road, #02-08 Federal Building, Singapore, 259756 |
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Abstract: | This paper examines the optimality of intertemporal price discrimination when network externality effects are present in the consumption of a durable good. We conduct our study in two settings. In a model with two household types, utilities are dependent on the cumulative proportion of households that have purchased the durable good. Next, in a model with a continuum of household types, we extend the analysis to the case where households consume both a durable good and a stream of non-durable goods. We show that in both settings, the presence of network externalities facilitates a sales strategy with intertemporal price discrimination. |
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Keywords: | intertemporal price discrimination durable good household demand network externality |
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