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 InfoPaper provided by Boston University - Industry Studies Programme in its series Papers with number 0045.
Date of creation: Feb 1994
Date of revision:
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Postal: Boston University, Industry Studies Program; Department of Economics, 270 Bay Road, Boston, Massachusetts 02215.
Web page: http://www.bu.edu/econ/isp/
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Other versions of this item:
- Yongmin Chen & Robert W. Rosenthal, 1996. "On the Use of Ceiling-Price Commitments by Monopolists," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 207-220, Summer.
- Chen, Y. & Rosenthal, R.W., 1994. "On the Use of Ceiling-Price Commitment by Monopolists," Papers 45, Boston University - Industry Studies Programme.
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