On the Use of Ceiling-Price Commitments by Monopolists

Yongmin Chen and Robert Rosenthal

RAND Journal of Economics, 1996, vol. 27, issue 2, 207-220

Abstract: The establishment of an asking, or ceiling, price from which reductions can be bargained is a common selling practice. For a monopolist seller of a single object, this article characterizes the best such ceiling price and shows that its use is optimal among all incentive-compatible mechanisms in a class of situations characterized by customers (1) who arrive one at a time and so do not compete with other directly and (2) who learn their idiosyncratic willingnesses to pay only by incurring idiosyncratic inspection costs.

Date: 1996
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Related works:
Working Paper: On the Use of Ceiling-Price Commitments by Monopolists (1994)
Working Paper: On the Use of Ceiling-Price Commitment by Monopolists (1994)
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