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Nonlinear Pricing

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  • Mark Armstrong

Abstract

I survey the use of nonlinear pricing as a method of price discrimination, both with monopoly and oligopoly supply. Topics covered include an analysis of when it is profitable to offer quantity discounts and bundle discounts, connections between second- and third-degree price discrimination, the use of market demand functions to calculate nonlinear tariffs, the impact of consumers with bounded rationality, bundling arrangements between separate sellers, and the choice of prices for upgrades and add-on products.

Suggested Citation

  • Mark Armstrong, 2015. "Nonlinear Pricing," Economics Series Working Papers 756, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:756
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    Cited by:

    1. Sjaak Hurkens & Doh-Shin Jeon & Domenico Menicucci, 2019. "Dominance and Competitive Bundling," American Economic Journal: Microeconomics, American Economic Association, vol. 11(3), pages 1-33, August.
    2. Jorge Barrientos & David Tobón & John Fredy Bedoya, 2010. "Three-Part Tariffs and Short-Run Rationality in the Local Fixed Telephone Consumption: Empirical Evidence from Medellín 2," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, February.

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    More about this item

    Keywords

    Price discrimination; nonlinear pricing; bundling; product-line pricing; screening; discrete choice.;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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