Nonlinear pricing of storable goods

Abstract

This paper develops a model of nonlinear pricing of storable goods. We show that storability imposes novel constraints on a monopolist's ability to extract surplus. We then show that the attempt to relax these constraints can generate cyclical patterns in pricing and sales, even when consumers are homogeneous. Thus, the model provides a novel explanation for sales that does not rely on discriminating heterogeneous consumers. Enriching the model to allow for buyer heterogeneity in storage technology delivers the prediction that larger bundles are more likely to be on sale.