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This strikes me as odd (from section 5.4): > "Acquisti and Varian [2001] examine a simple model with two types of consumers: high-value and low-value, in which
by endlessvoid94 16y ago
This strikes me as odd (from section 5.4):
> "Acquisti and Varian [2001] examine a simple model with two types of consumers: high-value and low-value, in which a monopolist can commit to a price plan. They find that although a monopolistic seller is able to make offers conditional on previous purchase history, it is never profitable for it to do so, which is consistent with the earlier analysis of intertemporal price discrimination by Stokey [1979] and Salant [1989]."
Isn't this what OS companies do? They charge less for upgrades? According to this paper, this would "never be profitable".
Am I misunderstanding this?
EDIT: added section number for reference and context
- bhoung 16y agoThe paper refers to whether a monopolist should set different prices to the two types of customers (high value or low). They find that the answer is no. The part that is confusing you (I think), is in the next paragraph, where the paper then finds that if the monopolist however offers an enhanced service based on purchasing history, it does become optimal to set two different prices. Also by "never profitable", they don't mean that the monopolist won't make any profit, it's just that they won't be able to increase profit.
- endlessvoid94 16y agoGotcha. I didn't realize he meant growth. Thanks.