On the Use of Ceiling-Price Commitments by Monopolists
AbstractThe 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.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 27 (1996)
Issue (Month): 2 (Summer)
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Other versions of this item:
- Chen, Y. & Rosenthal, R.W., 1994. "On the Use of Ceiling-Price Commitment by Monopolists," Papers 45, Boston University - Industry Studies Programme.
- Yongmin Chen & Robert W. Rosenthal, 1994. "On the Use of Ceiling-Price Commitments by Monopolists," Papers 0045, Boston University - Industry Studies Programme.
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