IDEAS home Printed from
   My bibliography  Save this article

On the Use of Ceiling-Price Commitments by Monopolists


  • Yongmin Chen
  • Robert W. Rosenthal


The establishment of an asking, or ceiling, price from which reductions can be bargained is a common selling practice. For a monopolist seller of a single object, this article characterizes the best such ceiling price and shows that its use is optimal among all incentive-compatible mechanisms in a class of situations characterized by customers (1) who arrive one at a time and so do not compete with other directly and (2) who learn their idiosyncratic willingnesses to pay only by incurring idiosyncratic inspection costs.

Suggested Citation

  • Yongmin Chen & Robert W. Rosenthal, 1996. "On the Use of Ceiling-Price Commitments by Monopolists," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 207-220, Summer.
  • Handle: RePEc:rje:randje:v:27:y:1996:i:summer:p:207-220

    Download full text from publisher

    File URL:
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See 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

    1. Haubrich, Joseph G, 1994. "Risk Aversion, Performance Pay, and the Principal-Agent Problem," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 258-276, April.
    2. Joskow, Paul L. & Rose, Nancy L. & Shepard, Andrea., 1993. "Regulatory constraints on executive compensation," Working papers 3550-93., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    3. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    4. Smiley, Robert H. & Greene, William H., 1983. "Determinants of the effectiveness of electric utility regulation," Resources and Energy, Elsevier, vol. 5(1), pages 65-81, March.
    5. repec:bin:bpeajo:v:24:y:1993:i:1993-1m:p:1-72 is not listed on IDEAS
    6. Murphy, Kevin J., 1985. "Corporate performance and managerial remuneration : An empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 11-42, April.
    7. Noll, Roger G., 1989. "Economic perspectives on the politics of regulation," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 22, pages 1253-1287 Elsevier.
    8. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
    9. Robert Gibbons & Kevin J. Murphy, 1990. "Relative Performance Evaluation for Chief Executive Officers," ILR Review, Cornell University, ILR School, vol. 43(3), pages 30, April.
    10. Peter Navarro, 1982. "Public Utility Commission Regulation: Performance, Determinants, and Energy Policy Impacts," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 119-140.
    11. Sloan, Richard G., 1993. "Accounting earnings and top executive compensation," Journal of Accounting and Economics, Elsevier, vol. 16(1-3), pages 55-100, April.
    12. Robert L. Hagerman & Brian T. Ratchford, 1978. "Some Determinants of Allowed Rates of Return on Equity to Electric Utilities," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 46-55, Spring.
    Full references (including those not matched with items on IDEAS)


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

    Cited by:

    1. Genesove, David & Han, Lu, 2012. "Search and matching in the housing market," Journal of Urban Economics, Elsevier, vol. 72(1), pages 31-45.
    2. Christos Constantatos, 2007. "Excessive Rents and Non-Compliance with Price Ceilings," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 5(2), pages 225-231.
    3. Merlo, Antonio & Ortalo-Magne, Francois, 2004. "Bargaining over residential real estate: evidence from England," Journal of Urban Economics, Elsevier, vol. 56(2), pages 192-216, September.
    4. Inami, Yusuke, 2011. "The buy price in auctions with discrete type distributions," Mathematical Social Sciences, Elsevier, vol. 61(1), pages 1-11, January.
    5. Jianping GU & Yasushi ASAMI, 2016. "Optimal List Price And Duration Of Vacancy In The Housing Market In Tokyo," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 28(3), pages 182-201, November.
    6. Gill, David & Thanassoulis, John, 2009. "The impact of bargaining on markets with price takers: Too many bargainers spoil the broth," European Economic Review, Elsevier, vol. 53(6), pages 658-674, August.
    7. Han, Lu & Strange, William C., 2015. "The Microstructure of Housing Markets," Handbook of Regional and Urban Economics, Elsevier.
    8. Wang, Ruqu, 2000. "Bidding and renegotiation in procurement auctions," European Economic Review, Elsevier, vol. 44(8), pages 1577-1597, August.
    9. Konishi, Hideo & Sandfort, Michael T., 2002. "Expanding demand through price advertisement," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 965-994, September.
    10. Han, Lu & Strange, William C., 2016. "What is the role of the asking price for a house?," Journal of Urban Economics, Elsevier, vol. 93(C), pages 115-130.
    11. Liu, Crocker H. & Nowak, Adam & Rosenthal, Stuart S., 2016. "Housing price bubbles, new supply, and within-city dynamics," Journal of Urban Economics, Elsevier, vol. 96(C), pages 55-72.

    More about this item


    Access and download statistics


    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:rje:randje:v:27:y:1996:i:summer:p:207-220. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.