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Optimal Selling Mechanisms for Multiproduct Monopolists: Incentive Compatibility in the Presence of Budget Constraints

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Author Info

  • Paulo Klinger Monteiro

    (Impa)

  • Frank H. Page Jr.

    (University of Alabama)

Abstract

We demonstrate the existence of an optimal, individually rational, and incentive compatible selling mechanism for a multiproduct monopolist facing a market populated by consumers with budget constraints. Our main contribution is to show via examples and our existence result that, in general, when facing consumers with budget constraints the monopolist is able to maximize profits over the set of individually rational and incentive compatible selling mechanisms only if other goods are available and only if the monopolist's goods are nonessential relative to other goods.

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Bibliographic Info

Paper provided by EconWPA in its series Microeconomics with number 9610002.

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Length: 18 pages
Date of creation: 22 Oct 1996
Date of revision:
Handle: RePEc:wpa:wuwpmi:9610002

Note: Type of Document - Latex; prepared on Textures; to print on PostScript; pages: 18
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Web page: http://128.118.178.162

Related research

Keywords: nonlinear pricing; budget constraints; multi-product;

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References

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  1. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
  2. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
  3. Laffont, Jean-Jacques & Robert, Jacques, 1996. "Optimal auction with financially constrained buyers," Economics Letters, Elsevier, vol. 52(2), pages 181-186, August.
  4. Leonard J. Mirman & David Sibley, 1980. "Optimal Nonlinear Prices for Multiproduct Monopolies," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 659-670, Autumn.
  5. McAfee, R. Preston & McMillan, John, 1988. "Multidimensional incentive compatibility and mechanism design," Journal of Economic Theory, Elsevier, vol. 46(2), pages 335-354, December.
  6. Spulber Daniel F., 1993. "Monopoly Pricing," Journal of Economic Theory, Elsevier, vol. 59(1), pages 222-234, February.
  7. Wilson, Robert, 1996. "Nonlinear pricing and mechanism design," Handbook of Computational Economics, in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 5, pages 253-293 Elsevier.
  8. Page, Frank H, Jr, 1992. "Mechanism Design for General Screening Problems with Moral Hazard," Economic Theory, Springer, vol. 2(2), pages 265-81, April.
  9. Monteiro, Paulo Klinger, 1996. "A new proof of the existence of equilibrium in incomplete market economies," Journal of Mathematical Economics, Elsevier, vol. 26(1), pages 85-101.
  10. Artstein, Zvi, 1979. "A note on fatou's lemma in several dimensions," Journal of Mathematical Economics, Elsevier, vol. 6(3), pages 277-282, December.
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Citations

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Cited by:
  1. PAGE, Frank, 2000. "Competitive selling mechanisms: the delegation principle and farsighted stability," CORE Discussion Papers 2000021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Figalli, Alessio & Kim, Young-Heon & McCann, Robert J., 2011. "When is multidimensional screening a convex program?," Journal of Economic Theory, Elsevier, vol. 146(2), pages 454-478, March.
  3. Naoki Kojima, 2014. "Mechanism design to the budget constrained buyer: a canonical mechanism approach," International Journal of Game Theory, Springer, vol. 43(3), pages 693-719, August.
  4. GAUTIER, Axel & MITRA, Manipushpak, 2003. "Financing infrastructure under budget constraints," CORE Discussion Papers 2003037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Pass, Brendan, 2012. "Convexity and multi-dimensional screening for spaces with different dimensions," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2399-2418.
  6. Carlier, Guillaume, 2001. "A general existence result for the principal-agent problem with adverse selection," Journal of Mathematical Economics, Elsevier, vol. 35(1), pages 129-150, February.

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