Optimal Mechanism for Selling Substitutes

Gregory Pavlov ()

No WP2006-014, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: We study a problem of a multiproduct monopolist selling substitutable goods to a buyer with unknown valuations. Under the standard distributional assumptions we find that in the optimal menu every nontrivial contract delivers some good with certainty. Using this result we apply control-theoretic tools to the case of two goods and solve a number of examples. The optimal menus generally have a simple structure and sometimes are substantially more profitable than the deterministic menus. We also extend the approach to the case when the buyer desires more than a single unit of the good.

Keywords: Multidimensional screening; Price discrimination; Optimal selling strategies (search for similar items in EconPapers)
JEL-codes: C61 D42 L11 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2006-02
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bos:wpaper:wp2006-014

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