Package Sizes, Tariffs, Quantity Discount and Premium

Babu Nahata (), Sergey Kokovin and Evgeny Zhelobodko

General Economics and Teaching from EconWPA

Abstract: We analyze nonlinear pricing problem under monopoly using two hidden types of agents with linear demands and fully characterize all possible optimal solutions for both ordered and non-ordered demands. We show that both optimal packages can either contain Pareto-efficient quantities or one package can be undersized or oversized. All these effects are non- degenerate and are expected to hold for nonlinear demands. Surprisingly, the total output under nonlinear price discrimination with self- selection is neither unambigously realted to efficiency nor to the degree of monopoly power (demand elasticity). We also show that under limited range of parameters quantity premia can occur only when demands are ordered.

Keywords: Principal-agent; self-selection; nonlinear pricing; package pricing; Pareto efficiency (search for similar items in EconPapers)
JEL-codes: D42 L10 L40 (search for similar items in EconPapers)
Date: 2003-07-03
Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP/PostScript/; pages: 35
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpgt:0307002

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