Dynamic Monopoly Pricing With Multiple Varieties: Trading Up
General Economics
2025-07-09 v3 Theoretical Economics
Economics
Abstract
This paper studies dynamic monopoly pricing for a broad class of settings that allow for multiple durable, multiple rental, or a mix of varieties. We show that the driving force behind pricing dynamics is the existence of trading-up opportunities. If there are no trading-up opportunities in the static monopoly outcome, then pricing dynamics do not emerge in equilibrium. With trading-up opportunities, pricing dynamics arise until these opportunities are exhausted or the game ends. We characterize the lower bound for the emerging prices and profit and study the conditions under which pricing dynamics end in finite time.
Cite
@article{arxiv.2108.07146,
title = {Dynamic Monopoly Pricing With Multiple Varieties: Trading Up},
author = {Stefan Buehler and Nicolas Eschenbaum and Severin Lenhard},
journal= {arXiv preprint arXiv:2108.07146},
year = {2025}
}