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Brand or Variety Choices and Periodic Sales as Substitute Instruments for Monopoly Price Discrimination

  • Author(s): Xia, Tian
  • Sexton, Richard J.
  • et al.
Abstract

We study the puzzle that sellers often employ diverse strategies in terms of carrying multiple brands and holding periodic sales. These two selling tools can be substitute instruments to induce consumer self selection and implement price discrimination. We analyze the factors that affect a seller’s choice between the two pricing instruments and show how different combinations of the two instruments can be optimal under alternative market conditions. A seller may, surprisingly, increase her total number of offers when it becomes more costly to carry brands or hold sales if there are decreasing marginal costs of the alternative selling tool.

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