Three principles of competitive nonlinear pricing
AbstractWe make three contributions to the theory of contracting under asymmetric information. First, we establish a competitive analog to the revelation principle which we call the implementation principle. This principle provides a complete characterization of all incentive compatible, indirect contracting mechanisms in terms of contract catalogs, and allows us to conclude that in competitive contracting situations, firms in choosing their contracting strategies can restrict attention to contract catalogs. Second, we establish a competitive taxation principle. This principle, a refinement of the implementation principle, provides a complete characterization of all implementable nonlinear pricing schedules in terms of product-price catalogs and allows us to reduce any game played over nonlinear pricing schedules to a strategically equivalent game played over product price catalogs. Third, using the existence of Nash equilibria in discontinuous games, we demonstrate the existence of Nash equilibria for the mixed extension of the nonlinear pricing game.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Mathematical Economics.
Volume (Year): 39 (2003)
Issue (Month): 1-2 (February)
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Web page: http://www.elsevier.com/locate/jmateco
Other versions of this item:
- Page Junior, Frank H. & Monteiro, Paulo Klinger, 2002. "Three Principles of Competitive Nonlinear Pricing," Economics Working Papers (Ensaios Economicos da EPGE) 442, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Frank H. Page & Paulo Klinger Monteiro, 2002. "Three principles of competitive nonlinear pricing," Game Theory and Information 0204001, EconWPA.
- Page, F.H.Jr. & Monteiro, P.K., 2001. "Three Principles of Competitive Nonlinear Pricing," The Warwick Economics Research Paper Series (TWERPS) 592, University of Warwick, Department of Economics.
- D4 - Microeconomics - - Market Structure and Pricing
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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