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A Property of Solutions to Linear Monopoly Problems

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Abstract

We extend the ‘no-haggling’ result of Riley and Zeckhauser (1983) to the class of linear multiproduct monopoly problems when the buyer’s valuations are smoothly distributed. In particular we show that there is no loss for the seller in optimizing over mechanisms such that all allocations belong to the boundary of the feasible set. The set of potentially optimal mechanisms can be further restricted when the costs are sufficiently low: the optimal mechanisms use only allocations from the ‘north-east’ boundary of the feasible set and the null allocation.

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File URL: http://economics.uwo.ca/research/department_working_papers_docs/wp2010/wp2010_2.pdf
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Bibliographic Info

Paper provided by University of Western Ontario, Department of Economics in its series UWO Department of Economics Working Papers with number 20102.

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Date of creation: 2010
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Handle: RePEc:uwo:uwowop:20102

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Postal: Department of Economics, Reference Centre, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
Phone: 519-661-2111 Ext.85244
Web page: http://economics.uwo.ca/research/research_papers/department_working_papers.html

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Keywords: Multidimensional screening; Price discrimination; Optimal selling strategies; Mechanism design;

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  1. Gregory Pavlov, 2010. "Optimal Mechanism for Selling Two Goods," UWO Department of Economics Working Papers 20103, University of Western Ontario, Department of Economics.
  2. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
  3. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August.
  4. McAfee, R. Preston & McMillan, John, 1988. "Multidimensional incentive compatibility and mechanism design," Journal of Economic Theory, Elsevier, vol. 46(2), pages 335-354, December.
  5. McAfee, R Preston & McMillan, John & Whinston, Michael D, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 371-83, May.
  6. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
  7. Thanassoulis, John, 2004. "Haggling over substitutes," Journal of Economic Theory, Elsevier, vol. 117(2), pages 217-245, August.
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Cited by:
  1. Gregory Pavlov, 2010. "Optimal Mechanism for Selling Two Goods," UWO Department of Economics Working Papers 20103, University of Western Ontario, Department of Economics.

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