Intertemporal monopoly pricing and the Coase and Pacman conjectures

Introduction

The Coase conjecture

Context of intertemporal pricing.

A monopolist can price discriminate by offering different prices at different times.

Coase conjecture is that under certain assumptions, this doesn’t work, and the monopolist will profit maximise by offering low price across time.

The Pacman conjecture

Related to Coase conjecture but opposite conclusion.

Monopolist can initially set prices at highest level then slowly lower them, eating total surplus (hence "pacman").

Relies on infinite time horizon.

Both Coase conjecture and Pacman conjecture are in the contetx of durable goods.