IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpgt/0307002.html
   My bibliography  Save this paper

Package Sizes, Tariffs, Quantity Discount and Premium

Author

Listed:
  • Babu Nahata

    (Department of Economics, University of Louisville)

  • Serguei Kokovin

    (Department of Economics, Novosibirsk State University)

  • Evgeny Zhelobodko

    (Department of Economics, Novosibirsk State University)

Abstract

We analyze nonlinear pricing problem under monopoly using two hidden types of agents with linear demands and fully characterize all possible optimal solutions for both ordered and non-ordered demands. We show that both optimal packages can either contain Pareto-efficient quantities or one package can be undersized or oversized. All these effects are non- degenerate and are expected to hold for nonlinear demands. Surprisingly, the total output under nonlinear price discrimination with self- selection is neither unambigously realted to efficiency nor to the degree of monopoly power (demand elasticity). We also show that under limited range of parameters quantity premia can occur only when demands are ordered.

Suggested Citation

  • Babu Nahata & Serguei Kokovin & Evgeny Zhelobodko, 2003. "Package Sizes, Tariffs, Quantity Discount and Premium," General Economics and Teaching 0307002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpgt:0307002
    Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP/PostScript/; pages: 35
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/get/papers/0307/0307002.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gerstner, Eitan & Hess, James D, 1987. "Why Do Hot Dogs Come in Packs of 10 and Buns in 8s or 12s? A Demand-Side Investigation," The Journal of Business, University of Chicago Press, vol. 60(4), pages 491-517, October.
    2. Michael L. Katz, 1983. "Non-uniform Pricing, Output and Welfare under Monopoly," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(1), pages 37-56.
    3. Michael L. Katz, 1984. "Nonuniform Pricing with Unobservable Numbers of Purchases," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 461-470.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nahata, Babu & Ringbom, Staffan, 2007. "Price discrimination using linear and nonlinear pricing simultaneously," Economics Letters, Elsevier, vol. 95(2), pages 267-271, May.
    2. Kimmo Berg & Harri Ehtamo, 2012. "Continuous learning methods in two-buyer pricing problem," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 75(3), pages 287-304, June.
    3. Kokovin, S. & Nahata, B. & Zhelobodko, E., 2011. "All Solution Graphs in Multidimensional Screening," Journal of the New Economic Association, New Economic Association, issue 11, pages 10-38.
    4. Kokovin Sergey & Zhelobodko Evgeniy, 2008. "Diagnosing Efficiency of Distortion in Discrete Screening," EERC Working Paper Series 08/02e, EERC Research Network, Russia and CIS.
    5. Babu Nahata & Serguei Kokovin & Evgeny Zhelobodko, 2003. "Self-Selection Under Non-Ordered Valuations: Type-Splitting, Envy-Cycles, Rationing And Efficiency," General Economics and Teaching 0307001, University Library of Munich, Germany.
    6. Babu Nahata & Serguei Kokovin & Evgeny Zhelobodko, 2003. "Informational Structure and Effciency in Monopoly," General Economics and Teaching 0307004, University Library of Munich, Germany.
    7. Chao, Yong & Nahata, Babu, 2015. "The degree of distortions under second-degree price discrimination," Economics Letters, Elsevier, vol. 137(C), pages 208-213.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kokovin Sergey & Zhelobodko Evgeniy, 2008. "Diagnosing Efficiency of Distortion in Discrete Screening," EERC Working Paper Series 08/02e, EERC Research Network, Russia and CIS.
    2. Nahata, Babu & Ringbom, Staffan, 2007. "Price discrimination using linear and nonlinear pricing simultaneously," Economics Letters, Elsevier, vol. 95(2), pages 267-271, May.
    3. Miravete, Eugenio & Seim, Katja & Thurk, Jeff, 2013. "Complexity, Efficiency, and Fairness of Multi-Product Monopoly Pricing," CEPR Discussion Papers 9641, C.E.P.R. Discussion Papers.
    4. Kokovin, Sergey & Nahata, Babu & Zhelobodko, Evgeny, 2008. "Why quantity premia are rare?," Economics Letters, Elsevier, vol. 100(1), pages 153-156, July.
    5. Daniel Flores Curiel, 2010. "La regulación del tamaño de los lotes habitacionales: un modelo de discriminación de precios," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 25(2), pages 407-424.
    6. Nicola Lacetera & Claudio A. Piga & Lorenzo Zirulia, 2021. "Sticky Price for Declining Risk? Business Strategies with “Behavioral” Customers in the Hotel Industry," NBER Working Papers 28456, National Bureau of Economic Research, Inc.
    7. Amrstong, Mark & Cowan, Simon & Vickers, John, 1995. "Nonlinear pricing and price cap regulation," Journal of Public Economics, Elsevier, vol. 58(1), pages 33-55, September.
    8. Atanu Lahiri & Rajiv M. Dewan & Marshall Freimer, 2013. "Pricing of Wireless Services: Service Pricing vs. Traffic Pricing," Information Systems Research, INFORMS, vol. 24(2), pages 418-435, June.
    9. Kenneth W. Clements, 2006. "Pricing and Packaging: The Case of Marijuana," The Journal of Business, University of Chicago Press, vol. 79(4), pages 2019-2044, July.
    10. Raghuram Iyengar & Kamel Jedidi, 2012. "A Conjoint Model of Quantity Discounts," Marketing Science, INFORMS, vol. 31(2), pages 334-350, March.
    11. Foubert, Bram & Gijsbrechts, Els, 2010. "Please or Squeeze? Brand performance implications of constrained and unconstrained multi-item promotions," European Journal of Operational Research, Elsevier, vol. 202(3), pages 880-892, May.
    12. Jeff Thurk, 2015. "Measuring the Unequal Implications of One Size Fits All Regulation," 2015 Meeting Papers 1251, Society for Economic Dynamics.
    13. Che, Yeon-Koo & Gale, Ian, 2000. "The Optimal Mechanism for Selling to a Budget-Constrained Buyer," Journal of Economic Theory, Elsevier, vol. 92(2), pages 198-233, June.
    14. Gerstner, Eitan & Klein, Katherine, 1990. "How To Quote A Price -- 0.50 Each Or 2 For 1.00?," Department of Economics and Business - Archive 259456, North Carolina State University, Department of Economics.
    15. Yonezawa, Koichi & Richards, Timothy J., 2016. "Competitive Package Size Decisions," Journal of Retailing, Elsevier, vol. 92(4), pages 445-469.
    16. Nana Adrian, 2019. "Price Discrimination and Salient Thinking," Diskussionsschriften dp1906, Universitaet Bern, Departement Volkswirtschaft.
    17. Girju, Marina & Prasad, Ashutosh & Ratchford, Brian T., 2013. "Pure Components versus Pure Bundling in a Marketing Channel," Journal of Retailing, Elsevier, vol. 89(4), pages 423-437.
    18. van Vuuren, Daniel, 2002. "Optimal pricing in railway passenger transport: theory and practice in The Netherlands," Transport Policy, Elsevier, vol. 9(2), pages 95-106, April.
    19. Cohen, Andrew, 2008. "Package size and price discrimination in the paper towel market," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 502-516, March.
    20. J. Miguel Villas-Boas, 1998. "Product Line Design for a Distribution Channel," Marketing Science, INFORMS, vol. 17(2), pages 156-169.

    More about this item

    Keywords

    Principal-agent; self-selection; nonlinear pricing; package pricing; Pareto efficiency;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpgt:0307002. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.