A Dynamic Model of Price Discrimination and Inventory Management at the Fulton Fish Market Graddy, Kathryn; Hall, George

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Graddy, Kathryn ; Hall, George
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Journal of Economic Behavior & Organization
Inventory Control; Wholesale Trade; Discrimination
To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jebo.2010.08.018 Byline: Kathryn Graddy, George Hall Keywords: Fish; Price discrimination; Yield management; Dynamic programming; Indirect inference Abstract: We estimate a dynamic profit-maximization model of a fish wholesaler who can observe consumer characteristics, set individual prices, and thus engage in third-degree price discrimination. Simulated prices and quantities from the model exhibit the key features observed in a set of high quality transaction-level data on fish sales collected at the Fulton Fish Market. The model's predictions are then compared to the case in which the wholesaler must post a single price to all retailers. We find the added revenue the wholesaler receives from price discriminating to be small. Author Affiliation: Department of Economics, Brandeis University, 415 South Street, Waltham, MA 02454-9110, United States Article History: Received 2 July 2009; Revised 26 August 2010; Accepted 26 August 2010 Article Note: (footnote) [star] We thank Jonathan Hamilton, two anonymous referees, and participants at the Brandeis IBS Brown-bag Seminar for helpful comments.
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