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Retail Pricing and Clearance Sales: The Multidimensional Case

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  • Mariano Runco

    (Auburn University at Montgomery)

Abstract

In this paper I generalize Lazear's model (1986) of retail pricing to the case of a monopolist selling two goods to a potential buyer with unknown valuations. The optimal prices and profit levels are computed for different distributions of valuations using Monte-Carlo simulations. Preliminary results show that the decrease in profits of the suboptimal pure bundling strategy (where the firm has to set only 2 prices) in both periods is extremely small relative to the profits of the optimal mixed bundling strategy (where the firm has to set 6 prices).

Suggested Citation

  • Mariano Runco, 2012. "Retail Pricing and Clearance Sales: The Multidimensional Case," Economics Bulletin, AccessEcon, vol. 32(1), pages 376-381.
  • Handle: RePEc:ebl:ecbull:eb-11-00642
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    References listed on IDEAS

    as
    1. Manelli, Alejandro M. & Vincent, Daniel R., 2007. "Multidimensional mechanism design: Revenue maximization and the multiple-good monopoly," Journal of Economic Theory, Elsevier, vol. 137(1), pages 153-185, November.
    2. Tyner, Wally & Adams, John, 1976. "Rural Electrification In India: Biogas Versus Large Scale Power," 1976 Annual Meeting, August 15-18, State College, Pennsylvania 283822, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Runco Mariano G, 2010. "A Note on the Multidimensional Monopolist Problem and Intertemporal Price Discrimination," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-8, August.
    4. William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 90(3), pages 475-498.
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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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