Planning Costs and Price Discrimination in Markets
for Time-Specific Goods

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Abstract/Contents

Abstract: When consumers have constant or non-existent planning costs firms can always achieve maximum profits with a single fixed price. However, when planning costs vary with consumers’ valuations a single fixed price is not always sufficient for profit maximization. In such cases it is optimal for the firm to provide an array of purchasing options. High valuation consumers will purchase with certainty at a high price while lower valuation consumers will opt for a lottery which gives some probability of being allowed to purchase at a discounted price and no opportunity to purchase otherwise. In general this type of mechanism may be difficult to implement, but in markets for time-specific goods any menu of lotteries can be realized by a descending price path with quantity restrictions at the discount prices.

Type of resource	text
Date created	September 2006

Author	Hegeman, John
Primary advisor	Levin, Jonathan
Degree granting institution	Stanford University, Department of Economics

Subject	Stanford Department of Economics
Subject	prices
Subject	valuations
Subject	consumer
Subject	markets
Genre	Thesis

Location	https://purl.stanford.edu/nk783xc2984

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Preferred Citation: Hegeman, John. (2006). Planning Costs and Price Discrimination in Markets
for Time-Specific Goods. Stanford Digital Repository. Available at: https://purl.stanford.edu/nk783xc2984

Stanford University, Department of Economics, Honors Theses

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