Essays on intertemporal price discrimination and on economic education

This dissertation aims to unify the advanced purchase premium and discount literature by showing how each can result from a single model. The first chapter of the dissertation develops a discrete demand model of the problem and examines the parameter values for which each pricing strategy is optimal. The second chapter develops a continuous demand model of the problem and proves the existence of profit maximizing premiums and discounts. The final chapter diverges from this topic. It is a study of how student learning of theoretical material is improved by relating the material to economic examples.;The first chapter, "Intertemporal Price Discrimination: Preference Knowledge and Capacity Choice" examines the conditions for when it is profit maximizing for a firm charge a higher price when consumers purchase in advance verses a lower price. When a firm sells tickets in advance under capacity constraints, as with airlines, concerts, and sports tickets, one observes that in some cases advanced sales are made at a discount while other times a premium is charged. Previous research into this intertemporal price discrimination has focused on either premium or discount pricing but never both. Given that we observer both types of intertemporal price discrimination in markets characterized by advanced sales and capacity constraints, it is important to understand the conditions that determine the nature of the optimal pricing scheme. This paper is the first to shows that the nature of the profit maximizing intertemporal pricing scheme depends on the interaction of consumer preference intensity, preference certainty, and firm capacity. I then examine optimal capacity choice as a function of consumer preferences showing that the choice of capacity will be a negatively related to its cost for a given level of preference intensity and equal to the ex-post demand for one of the goods.;Chapter two, "Advanced-Purchase Premiums versus Discounts in the Presence of Capacity Constraints" moves the discussion of premiums and discounts from the discrete environment of the first paper into a continuous framework. When examining the pricing behavior of airlines, concerts, and sports tickets one observes that in some cases advanced sales are made at a discount while other times a premium is charged. While these markets are all characterized by advanced sales and capacity constraints, the firms' advanced pricing strategies differ. This paper first develops a continuous model of consumer preference certainty and mismatch costs. It is shown that advance-purchase discounts are profit maximizing when most customers are uncertain as to their future preferences. Advanced purchase premiums are shown to be profit maximizing when most consumers know their preferred good in advance. Finally, it is shown that when offering a discount is optimal, both profit and consumer surplus increase.;The final chapter, "The Impact of Analyzing Economic Events on the Learning of Undergraduate Economic Theory" is a pedagogy study on the spillover effects of analyzing real world events on the learning of mathematical economic theory. In this chapter, I study the effect of having students read and respond to articles regarding economic events on the learning of economic theory in both Intermediate Microeconomics and Intermediate Macroeconomics. We find that having students apply theoretical material to real world situations has spillover effects into the learning of theoretical material itself. By assigning articles and measuring performance on midterm exams in four Intermediate Theory courses during the 2007-08 academic year, we find that each additional article a student completed resulted in an improvement of approximately one percentage point on a given midterm exam. This effect grew to three percentage points per article completed on the middle of three midterms where it could be ensured that both "finish everything early" students and "procrastinate as long as possible" students were represented.