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Paper No. 05-2005
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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.