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Monopoly Provision of Quality and Warranties: An Exploration in the Theory of Multidimensional Screening

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Author Info
Matthews, Steven
Moore, John

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Abstract

New ways of handling incentive constraints between nonadjacent types of buyer are used to solve a monopoly screening problem. The monopoly wishes to price discriminate by designing a product line of goods distinguished by different quality, warranty, and price attributes. The multidimensionality of the line causes the local approach usually taken to fail. The optimal product line is nevertheless fully characterized. Contrary to the result always obtained in simple models, attributes need not be monotone in buyer type, e.g., more eager types sometimes receive lower quality. Copyright 1987 by The Econometric Society.

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Publisher Info
Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 55 (1987)
Issue (Month): 2 (March)
Pages: 441-67
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Handle: RePEc:ecm:emetrp:v:55:y:1987:i:2:p:441-67

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law & Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
  2. Leonard J. Mirman & David Sibley, 1980. "Optimal Nonlinear Prices for Multiproduct Monopolies," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 659-670, Autumn. [Downloadable!] (restricted)
  3. Russell Cooper, 1984. "On Allocative Distortions in Problems of Self-Selection," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 568-577, Winter. [Downloadable!] (restricted)
  4. Braverman, Avishay & Guasch, J Luis & Salop, Steven, 1983. "Defects in Disneyland: Quality Control as a Two-Part Tariff," Review of Economic Studies, Blackwell Publishing, vol. 50(1), pages 121-31, January. [Downloadable!] (restricted)
  5. Roberts, Kevin W S, 1979. "Welfare Considerations of Nonlinear Pricing," Economic Journal, Royal Economic Society, vol. 89(353), pages 66-83, March. [Downloadable!] (restricted)
  6. Courville, Leon & Hausman, Warren H, 1979. "Warranty Scope and Reliability under Imperfect Information and Alternative Market Structures," Journal of Business, University of Chicago Press, vol. 52(3), pages 361-78, July. [Downloadable!] (restricted)
  7. Matthews, Steven A., 1983. "Selling to risk averse buyers with unobservable tastes," Journal of Economic Theory, Elsevier, vol. 30(2), pages 370-400, August. [Downloadable!] (restricted)
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  8. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August. [Downloadable!] (restricted)
  9. Moore, John, 1984. "Global Incentive Constraints in Auction Design," Econometrica, Econometric Society, vol. 52(6), pages 1523-35, November. [Downloadable!] (restricted)
  10. Spence, A Michael, 1977. "Consumer Misperceptions, Product Failure and Producer Liability," Review of Economic Studies, Blackwell Publishing, vol. 44(3), pages 561-72, October. [Downloadable!] (restricted)
  11. J. A. Mirrlees, 1976. "Optimal Tax Theory: A Synthesis," Working papers 176, Massachusetts Institute of Technology (MIT), Department of Economics.
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  12. Harris, Milton & Raviv, Artur, 1981. "A Theory of Monopoly Pricing Schemes with Demand Uncertainty," American Economic Review, American Economic Association, vol. 71(3), pages 347-65, June.
  13. Guesnerie, Roger & Seade, Jesus, 1982. "Nonlinear pricing in a finite economy," Journal of Public Economics, Elsevier, vol. 17(2), pages 157-179, March. [Downloadable!] (restricted)
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  14. Richard Arnott & Joseph E. Stiglitz, 1985. "Randomization with Asymmetric Information a Simplified Exposition," Working Papers 594, Queen's University, Department of Economics.
  15. Goldman, M Barry & Leland, Hayne E & Sibley, David S, 1984. "Optimal Nonuniform Prices," Review of Economic Studies, Blackwell Publishing, vol. 51(2), pages 305-19, April. [Downloadable!] (restricted)
  16. Heal, Geoffrey, 1977. "Guarantees and Risk-Sharing," Review of Economic Studies, Blackwell Publishing, vol. 44(3), pages 549-60, October. [Downloadable!] (restricted)
  17. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August. [Downloadable!] (restricted)
  18. Chiang, Raymond & Spatt, Chester S, 1982. "Imperfect Price Discrimination and Welfare," Review of Economic Studies, Blackwell Publishing, vol. 49(2), pages 155-81, April. [Downloadable!] (restricted)
  19. Ekelund, Robert B, Jr, 1970. "Price Discrimination and Product Differentiation in Economic Theory: An Early Analysis," The Quarterly Journal of Economics, MIT Press, vol. 84(2), pages 268-78, May. [Downloadable!] (restricted)
  20. Thomas Palfrey & Thomas Romer, 1983. "Warranties, Performance, and the Resolution of Buyer-Seller Disputes," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 97-117, Spring. [Downloadable!] (restricted)
  21. Stiglitz, Joseph E, 1977. "Monopoly, Non-linear Pricing and Imperfect Information: The Insurance Market," Review of Economic Studies, Blackwell Publishing, vol. 44(3), pages 407-30, October. [Downloadable!] (restricted)
  22. Schwartz, Alan & Wilde, Louis L., . "Consumer Markets for Warranties," Working Papers 445, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  23. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November. [Downloadable!] (restricted)
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  24. Spence, A Michael, 1980. "Multi-Product Quantity-Dependent Prices and Profitability Constraints," Review of Economic Studies, Blackwell Publishing, vol. 47(5), pages 821-41, October. [Downloadable!] (restricted)
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