IDEAS home Printed from https://ideas.repec.org/a/ecm/emetrp/v55y1987i2p441-67.html
   My bibliography  Save this article

Monopoly Provision of Quality and Warranties: An Exploration in the Theory of Multidimensional Screening

Author

Listed:
  • Matthews, Steven
  • Moore, John

Abstract

New ways of handling incentive constraints between nonadjacent types of buyer are used to solve a monopoly screening problem. The monopoly wishes to price discriminate by designing a product line of goods distinguished by different quality, warranty, and price attributes. The multidimensionality of the line causes the local approach usually taken to fail. The optimal product line is nevertheless fully characterized. Contrary to the result always obtained in simple models, attributes need not be monotone in buyer type, e.g., more eager types sometimes receive lower quality. Copyright 1987 by The Econometric Society.

Suggested Citation

  • Matthews, Steven & Moore, John, 1987. "Monopoly Provision of Quality and Warranties: An Exploration in the Theory of Multidimensional Screening," Econometrica, Econometric Society, vol. 55(2), pages 441-467, March.
    • Handle: RePEc:ecm:emetrp:v:55:y:1987:i:2:p:441-67
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0012-9682%28198703%2955%3A2%3C441%3AMPOQAW%3E2.0.CO%3B2-Y&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Russell Cooper, 1984. "On Allocative Distortions in Problems of Self-Selection," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 568-577, Winter.
    2. 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.
    3. Palfrey, Thomas R, 1983. "Bundling Decisions by a Multiproduct Monopolist with Incomplete Information," Econometrica, Econometric Society, vol. 51(2), pages 463-483, March.
    4. Joseph E. Stiglitz, 1977. "Monopoly, Non-linear Pricing and Imperfect Information: The Insurance Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 407-430.
    5. A. Michael Spence, 1980. "Multi-Product Quantity-Dependent Prices and Profitability Constraints," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(5), pages 821-841.
    6. Moore, John, 1984. "Global Incentive Constraints in Auction Design," Econometrica, Econometric Society, vol. 52(6), pages 1523-1535, November.
    7. Mirrlees, J. A., 1976. "Optimal tax theory : A synthesis," Journal of Public Economics, Elsevier, vol. 6(4), pages 327-358, November.
    8. M. Barry Goldman & Hayne E. Leland & David S. Sibley, 1984. "Optimal Nonuniform Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(2), pages 305-319.
    9. Guesnerie, Roger & Seade, Jesus, 1982. "Nonlinear pricing in a finite economy," Journal of Public Economics, Elsevier, vol. 17(2), pages 157-179, March.
    10. Richard Arnott & Joseph E. Stiglitz, 1985. "Randomization with Asymmetric Information a Simplified Exposition," Working Paper 594, Economics Department, Queen's University.
    11. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    12. Geoffrey Heal, 1977. "Guarantees and Risk-Sharing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 549-560.
    13. Matthews, Steven A., 1983. "Selling to risk averse buyers with unobservable tastes," Journal of Economic Theory, Elsevier, vol. 30(2), pages 370-400, August.
    14. Robert B. Ekelund, 1970. "Price Discrimination and Product Differentiation in Economic Theory: An Early Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(2), pages 268-278.
    15. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-483, December.
    16. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    17. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
    18. Roberts, Kevin W S, 1979. "Welfare Considerations of Nonlinear Pricing," Economic Journal, Royal Economic Society, vol. 89(353), pages 66-83, March.
    19. William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(3), pages 475-498.
    20. Michael Spence, 1977. "Consumer Misperceptions, Product Failure and Producer Liability," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 561-572.
    21. Courville, Leon & Hausman, Warren H, 1979. "Warranty Scope and Reliability under Imperfect Information and Alternative Market Structures," The Journal of Business, University of Chicago Press, vol. 52(3), pages 361-378, July.
    22. Harris, Milton & Raviv, Artur, 1981. "A Theory of Monopoly Pricing Schemes with Demand Uncertainty," American Economic Review, American Economic Association, vol. 71(3), pages 347-365, June.
    23. Oliver D. Hart, 1983. "Optimal Labour Contracts under Asymmetric Information: An Introduction," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(1), pages 3-35.
    24. Raymond Chiang & Chester S. Spatt, 1982. "Imperfect Price Discrimination and Welfare," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(2), pages 155-181.
    25. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
    26. Thomas Palfrey & Thomas Romer, 1983. "Warranties, Performance, and the Resolution of Buyer-Seller Disputes," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 97-117, Spring.
    27. Avishay Braverman & J. Luis Guasch & Steven Salop, 1983. "Defects in Disneyland: Quality Control as a Two-Part Tariff," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(1), pages 121-131.
    Full references (including those not matched with items on IDEAS)

    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. Steven Matthews & John Moore, 1984. "Monopoly Provision of Product Quality and Warranties," Discussion Papers 585R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Andersson, Tommy, 2004. "Essays on Nonlinear Pricing and Welfare," MPRA Paper 59446, University Library of Munich, Germany.
    3. Russell Cooper, 1984. "On Allocative Distortions in Problems of Self-Selection," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 568-577, Winter.
    4. X. Ruiz del Portal, 2012. "Conditions for incentive compatibility in models with multidimensional allocation functions and one-dimensional types," Review of Economic Design, Springer;Society for Economic Design, vol. 16(4), pages 311-321, December.
    5. Pascal Courty & Li Hao, 2000. "Sequential Screening," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(4), pages 697-717.
    6. Saeed Alaei & Hu Fu & Nima Haghpanah & Jason Hartline & Azarakhsh Malekian, 2019. "Efficient Computation of Optimal Auctions via Reduced Forms," Mathematics of Operations Research, INFORMS, vol. 44(3), pages 1058-1086, August.
    7. Mark Armstrong, 2016. "Nonlinear Pricing," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 583-614, October.
    8. Szalay, Dezsö, 2008. "Monopoly, Non-linear Pricing, and Imperfect Information : A Reconsideration of the Insurance Market," The Warwick Economics Research Paper Series (TWERPS) 863, University of Warwick, Department of Economics.
    9. Guy Ho Wang, 2000. "On The Dynamic Incentive of Price-Quality Differentiation By A Monopolist Firm," International Economic Journal, Taylor & Francis Journals, vol. 14(1), pages 33-45.
    10. Eugenio J. Miravete, 2001. "Screening Through Bundling," Penn CARESS Working Papers 3b8e0b3847b08b90e8570987c, Penn Economics Department.
    11. Jehiel, Philippe & Meyer-ter-Vehn, Moritz & Moldovanu, Benny, 2007. "Mixed bundling auctions," Journal of Economic Theory, Elsevier, vol. 134(1), pages 494-512, May.
    12. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1999. "Multidimensional Mechanism Design for Auctions with Externalities," Journal of Economic Theory, Elsevier, vol. 85(2), pages 258-293, April.
    13. David Hakes & Dongsoo Shin, 2008. "Warranties as a device to extract rent from low-risk users of a product," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 1-7.
    14. Bing Jing & Roy Radner, 2004. "Nonconvex Production Technology and Price Discrimination," Working Papers 04-04, New York University, Leonard N. Stern School of Business, Department of Economics.
    15. Noldeke, Georg & Samuelson, Larry, 2007. "Optimal bunching without optimal control," Journal of Economic Theory, Elsevier, vol. 134(1), pages 405-420, May.
    16. Kelvin Shuangjian Zhang, 2017. "Existence in Multidimensional Screening with General Nonlinear Preferences," Papers 1710.08549, arXiv.org, revised Dec 2018.
    17. Sameer Mehta & Milind Dawande & Ganesh Janakiraman & Vijay Mookerjee, 2021. "How to Sell a Data Set? Pricing Policies for Data Monetization," Information Systems Research, INFORMS, vol. 32(4), pages 1281-1297, December.
    18. Dirk Bergemann & Karl Schlag, 2012. "Robust Monopoly Pricing," World Scientific Book Chapters, in: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs, chapter 13, pages 417-441, World Scientific Publishing Co. Pte. Ltd..
    19. Jensen, Sissel, 2008. "Two-part tariffs with quality degradation," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 473-489, March.
    20. Miravete, Eugenio J., 2011. "Convolution and composition of totally positive random variables in economics," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 479-490.

    More about this item

    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:ecm:emetrp:v:55:y:1987:i:2:p:441-67. 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: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/essssea.html .

    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.