A discrimination model for the dynamic monopoly firm

Abstract

In this study, the price discrimination problem for the dynamic monopoly firm is formulated as an optimal control problem for the case where the demands are interdependent pricewise. This formulation reflects both the description of the discrimination problem as found in the literature and a dynamic demand law. The objective of the firm is to maximize, subject to constraints, the discounted value of the firm's capacity at the end of a finite interval plus the integral over a finite interval of the discounted returns from sales in the two markets less the discounted costs of production, product differentiation, and investment. The constraints are four differential equations describing the tem..