Template-Type: ReDIF-Paper 1.0
Title: A Dynamic Theory of Random Price Discounts
Author-Name: Francesc Dilmé
Author-Email: fdilme@uni-bonn.de
Author-Name: Daniel F. Garrett
Author-Email: d.garrett@essex.ac.uk
Classification-JEL: D82
Keywords: dynamic pricing, sales, random mechanisms

Abstract: 
A seller with commitment power sets prices over time. Risk‐averse buyers arrive to the market
and decide when to purchase. We show that it is optimal for the seller to choose a constant high
price punctuated by occasional episodes of sequential discounts that occur at random times.
This optimal price path has the property that the price a buyer ends up paying is independent of
his arrival and purchase times, and only depends on his valuation. Our theory accommodates
empirical findings on the timing of discounts.

Note: 
Length: 45
Creation-Date: 2025-05
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp688
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2025_688