Abstract
This paper deals with the phenomenon of clearance sales. These can be considered as cases of intertemporal price discrimination. At first the good or service is sold at a high price, and after a first period the price is reduced. In mass consumption retailing the price reduction policy is applied as a matter of routine with typically one, two or three reductions. To understand such a policy we have to realize that there are costs involved with clearance sales. In the paper a model is presented which can be used to answer questions like: what is the optimal number of price reductions?, or: what is the optimal price reduction schedule? The paper also presents a matrix formulation of the model. In addition some numerical examples are given.
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