Nonprice Rationing and Monopoly Price Structures when Demand is Stochastic

Roger Sherman and Michael Visscher

Bell Journal of Economics, 1982, vol. 13, issue 1, 254-262

Abstract: When demand is stochastic, a monopoly offering several product varieties, each at a preannounced price, can profitably discriminate in price if nonprice rationing mechanisms, such as queuing or reservations, can determine the order in which consumers are served. But in such circumstances the optimal price structure and, in turn, profit, depend on the particular ordering of consumers; the monopolist will prefer a rationing mechanism that gives priority to consumers with the lowest willingness to pay, because it allows profitable discrimination.

Date: 1982
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