"Fashion and Sales"
JEL codes: D11; D42; D82; L11
Keywords: Fashion, product differentiaton, clearance sales
Abstract: When there is unpredictable fashion in taste it will be optimal to limit the stock of each variety of a horizontally differentiated durable good. If consumers are uncertain about one anotherīs taste they will then accept higher first period prices for perfect matches in order to avoid finding only bad matches on sale. Thus there exists a mechanism which allows a monopolist to price discriminate inter-temporally even when it has predictable clearance sales and consumers are infinitely patient. There is no distortion in product selection when this equilibrium arises.
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