We study the profit-maximizing price path of a monopolist selling a durable good to buyers who arrive over time and whose values for the good evolve stochastically. The setting is completely stationary with an infinite horizon. Contrary to the case with constant values, optimal prices fluctuate with time. We argue that consumers’ randomly changing values offer an explanation for temporary price reductions that are often observed in practice. (JEL D82)
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Daniel F. Garrett (2016) studied this question.
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