Year: 2025
Type: article
Abstract: A seller with commitment power sets prices over time. Risk-averse buyers arrive to the market and decide when to purchase. We show that it is optimal for the seller to choose a constant high price punctuated by occasional episodes of sequential discounts that occur at random times. This optimal price-path has the property that the price a buyer ends up paying is independent of his arrival and purchase times, and only depends on his valuation. Our theory accommodates empirical findings on the timing of discounts.
Source: The Review of Economic Studies
Authors: Francesc Dilmé, Daniel F Garrett
Institutions: University of Bonn, University of Essex
Language: English
Subfield: Marketing
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $6,530
OpenAlex ID: W4413809266