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Multiproduct Nonlinear Pricing with Multiple Taste Characteristics

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  • David S. Sibley
  • Padmanabhan Srinagesh
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    Abstract

    We analyze optimal multiproduct nonlinear prices in the case where consumer tastes are characterized by more than one taste parameter. We present conditions under which the optimal nonlinear price schedule can be computed by finding optimal price schedules separately for each market. If so, they are unbundled; if not, they are bundled. Bundling is weakly superior to unbundling and is strictly superior when a condition that we term uniform ordering of demand curves is weakly violated. With uniform ordering of demand curves, multiproduct nonlinear prices have the same features as single-product ones. Without this condition it is easy to construct examples that contradict some well-known results from the standard literature in mechanism design.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal RAND Journal of Economics.

    Volume (Year): 28 (1997)
    Issue (Month): 4 (Winter)
    Pages: 684-707

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    Handle: RePEc:rje:randje:v:28:y:1997:i:winter:p:684-707

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    Cited by:
    1. Brighi, Luigi & D'Amato, Marcello, 2002. "Two-dimensional screening: a case of monopoly regulation," Research in Economics, Elsevier, Elsevier, vol. 56(3), pages 251-264, September.
    2. Yossi Spiegel & Simon Wilkie, 2000. "Optimal Multiproduct Nonlinear Pricing with Correlated Consumer Types," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1299, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Ivan Arribas & Amparo Urbano, 2004. "Mixed Bundling Strategies And Multiproduct Price Competition," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2004-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    4. Greenlee, Patrick & Reitman, David & Sibley, David S., 2008. "An antitrust analysis of bundled loyalty discounts," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 26(5), pages 1132-1152, September.
    5. Sibly, Hugh, 2008. "Vertical Product Differentiation with Linear Pricing," Working Papers, University of Tasmania, School of Economics and Finance 7335, University of Tasmania, School of Economics and Finance, revised 01 Jul 2008.
    6. María Angeles García Valiñas, 2004. "Eficiencia y equidad en el diseño de precios óptimos para bienes y servicios públicos," Hacienda Pública Española, IEF, IEF, vol. 168(1), pages 95-119, march.
    7. Sibly, Hugh, 2012. "A decomposition of monopolistic quality distortion," Research in Economics, Elsevier, Elsevier, vol. 66(1), pages 97-105.
    8. Miravete, Eugenio J., 2011. "Convolution and composition of totally positive random variables in economics," Journal of Mathematical Economics, Elsevier, Elsevier, vol. 47(4-5), pages 479-490.
    9. Jensen, Sissel, 2008. "Two-part tariffs with quality degradation," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 26(2), pages 473-489, March.

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