Abstract
This paper examines price discrimination in a market where consumers learn their preferences over time. The products are perfect substitutesex ante, but there is horizontal differentiationex post. Air travel provides one example of such a market. In equilibrium, there is more price discrimination under duopoly than under monopoly, which is consistent with recent empirical evidence from the U.S. airline industry.
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I am grateful to Tom Holmes for many discussions on related topics.
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Gale, I. Price dispersion in a market with advance-purchases. Rev Ind Organ 8, 451–464 (1993). https://doi.org/10.1007/BF01024281
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DOI: https://doi.org/10.1007/BF01024281