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Article: Intertemporal price discrimination with complementary products: E-books and e-readers
Title | Intertemporal price discrimination with complementary products: E-books and e-readers |
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Authors | |
Keywords | Complementary products E-book market Harvesting Intertemporal price discrimination Investing Skimming and penetration pricing |
Issue Date | 2019 |
Citation | Management Science, 2019, v. 65, n. 6, p. 2665-2694 How to Cite? |
Abstract | This paper studies intertemporal price discrimination (IPD) with complementary products in the context of e-readers and e-books. Using individual-level data (2008–2012), I estimate a dynamic demand model for e-reader adoption and subsequent book quantity, reading format, and retailer choices in several book genres. I use the estimates to simulate a monopolist’s optimal dynamic pricing strategies when facing forward-looking consumers. The results illustrate how skimming/penetration pricing incentives for e-readers and harvesting/investing incentives for e-books interact in this novel setting. The optimal joint IPD strategy is skimming for e-readers and investing for e-books. Counterfactual results suggest that combining IPD with complementary product pricing improves firm profitability because it attenuates the limitations of each pricing approach. In a single-product IPD setting, firms’ pricing power is limited when consumers anticipate future price changes and delay purchases. Adding complementary products offers firms two pricing instruments; opposite price trajectories provide conflicting incentives for consumers, limiting intertemporal arbitrage. In a static complementary product setting, firms’ pricing power is limited when the relative elasticity between the two products is heterogeneous and conflicting among consumers. Adding IPD sorts heterogeneous consumers into different periods and reduces the need to balance across consumer types. |
Persistent Identifier | http://hdl.handle.net/10722/315296 |
ISSN | 2023 Impact Factor: 4.6 2023 SCImago Journal Rankings: 5.438 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Li, Hui | - |
dc.date.accessioned | 2022-08-05T10:18:22Z | - |
dc.date.available | 2022-08-05T10:18:22Z | - |
dc.date.issued | 2019 | - |
dc.identifier.citation | Management Science, 2019, v. 65, n. 6, p. 2665-2694 | - |
dc.identifier.issn | 0025-1909 | - |
dc.identifier.uri | http://hdl.handle.net/10722/315296 | - |
dc.description.abstract | This paper studies intertemporal price discrimination (IPD) with complementary products in the context of e-readers and e-books. Using individual-level data (2008–2012), I estimate a dynamic demand model for e-reader adoption and subsequent book quantity, reading format, and retailer choices in several book genres. I use the estimates to simulate a monopolist’s optimal dynamic pricing strategies when facing forward-looking consumers. The results illustrate how skimming/penetration pricing incentives for e-readers and harvesting/investing incentives for e-books interact in this novel setting. The optimal joint IPD strategy is skimming for e-readers and investing for e-books. Counterfactual results suggest that combining IPD with complementary product pricing improves firm profitability because it attenuates the limitations of each pricing approach. In a single-product IPD setting, firms’ pricing power is limited when consumers anticipate future price changes and delay purchases. Adding complementary products offers firms two pricing instruments; opposite price trajectories provide conflicting incentives for consumers, limiting intertemporal arbitrage. In a static complementary product setting, firms’ pricing power is limited when the relative elasticity between the two products is heterogeneous and conflicting among consumers. Adding IPD sorts heterogeneous consumers into different periods and reduces the need to balance across consumer types. | - |
dc.language | eng | - |
dc.relation.ispartof | Management Science | - |
dc.subject | Complementary products | - |
dc.subject | E-book market | - |
dc.subject | Harvesting | - |
dc.subject | Intertemporal price discrimination | - |
dc.subject | Investing | - |
dc.subject | Skimming and penetration pricing | - |
dc.title | Intertemporal price discrimination with complementary products: E-books and e-readers | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1287/mnsc.2018.3083 | - |
dc.identifier.scopus | eid_2-s2.0-85066959397 | - |
dc.identifier.volume | 65 | - |
dc.identifier.issue | 6 | - |
dc.identifier.spage | 2665 | - |
dc.identifier.epage | 2694 | - |
dc.identifier.eissn | 1526-5501 | - |
dc.identifier.isi | WOS:000470112100012 | - |