Three principles of competitive nonlinear pricing

Frank H. Page and Paulo Klinger Monteiro
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Frank H. Page: University of Alabama

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Abstract: We make three contributions to the theory of contracting under asymmetric information. First, we establish a competitive analog to the revelation principle which we call the implementation principle. This principle provides a complete characterization of all incentive compatible, indirect contracting mechanisms in terms of contract catalogs, and allows us to conclude that in competitive contracting situations, firms in choosing their contracting strategies can restrict attention to contract catalogs. Second, we establish a competitive taxation principle. This principle, a refinement of the implementation principle, provides a complete characterization of all implementable nonlinear pricing schedules in terms of product-price catalogs and allows us to reduce any game played over nonlinear pricing schedules to a strategically equivalent game played over product price catalogs. Third, using the existence of Nash equilibria in discontinuous games, we demonstrate the existence of Nash equilibria for the mixed extension of the nonlinear pricing game.

Keywords: nonlinear; pricing (search for similar items in EconPapers)
JEL-codes: D4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
Date: 2002-04-04
Note: Type of Document - latex; prepared on ScW; pages: 44
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Related works:
Working Paper: Three Principles of Competitive Nonlinear Pricing (2001)
Working Paper: Three Principles of Competitive Nonlinear Pricing (2002)
Journal Article: Three principles of competitive nonlinear pricing (2003)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpga:0204001

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