Mechanism Design with Limited Information: The Case of Nonlinear Pricing
AbstractWe analyze the canonical nonlinear pricing model with limited information. A seller offers a menu with a finite number of choices to a continuum of buyers with a continuum of possible valuations. By revealing an underlying connection to quantization theory, we derive the optimal finite menu for the socially efficient and the revenue-maximizing mechanism. In both cases, we provide an estimate of the loss resulting from the usage of a finite n-class menu. We show that the losses converge to zero at a rate proportional to 1/n^2 as n becomes large.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1775.
Length: 12 pages
Date of creation: Nov 2010
Date of revision:
Publication status: Published in Rahul Jain and Rajgopal Kannan, eds., Game Theory for Networks. Lecture Notes of the Institute for Computer Sciences, Social Informatics and Telecommunications Engineering, Vol. 75, 2012, pp. 1-10
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
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- Dirk Bergemann & Ji Shen & Yun Xu & Edmund M. Yeh, 2012.
"Multi-dimensional Mechanism Design with Limited Information,"
Cowles Foundation Discussion Papers
1859, Cowles Foundation for Research in Economics, Yale University.
- Dirk Bergemann & Ji Shen & Yun Xu & Edmund M. Yeh, 2012. "Multi-Dimensional Mechanism Design with Limited Information," Levine's Working Paper Archive 786969000000000559, David K. Levine.
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