Optimal nonlinear pricing by a monopolist with information ambiguity

Mingli Zheng (), Chong Wang and Chaozheng Li

International Journal of Industrial Organization, 2015, vol. 40, issue C, 60-66

Abstract: We consider the optimal nonlinear pricing by an ambiguity-averse monopolist. The monopolist's subjective belief about the distribution of buyers is described by ϵ-contamination of an additive probability. We find that under a maxmin utility decision rule and with a continuum of buyers, ambiguity aversion leads to bunching at the bottom in the optimal contract, and the distortion at the bottom is reduced. Other high valuation buyers are offered the same quantity as in the case without ambiguity, but they get a greater discount.

Keywords: Monopoly; Nonlinear pricing; Ambiguity aversion; Maxmin utility; Bunching; Optimal control (search for similar items in EconPapers)
JEL-codes: C61 D82 L12 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:40:y:2015:i:c:p:60-66

DOI: 10.1016/j.ijindorg.2015.03.008

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