Optimal Second-Degree Price Discrimination and Arbitrage: On the Role of Asymmetric Information Among Buyers
The traditional theory of second-degree price discrimination tackles individual self-selection but does not address the possibility that buyers could form a coalition to conduct arbitrage. We study the optimal sale mechanism that takes into account both individual and coalition incentive compatibility. We show that the monopolist can achieve the same profit regardless of whether or not buyers can form a coalition. Although marginal rates of substitution are not equalized across buyers of different types in the optimal sale mechanism, they fail to realize the gains from arbitrage because of the transaction costs in coalition formation generated by asymmetric information.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 36 (2005)
Issue (Month): 2 (Summer)
|Contact details of provider:|| Web page: http://www.rje.org|
|Order Information:||Web: https://editorialexpress.com/cgi-bin/rje_online.cgi|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zheng, Charles Zhoucheng, 2002.
"Optimal Auction with Resale,"
Staff General Research Papers Archive
12664, Iowa State University, Department of Economics.
- McAfee, R. Preston & McMillan, John., 1990.
726, California Institute of Technology, Division of the Humanities and Social Sciences.
- Cramton, Peter C. & Palfrey, Thomas R., 1990.
"Ratifiable Mechanisms: Learning from Disagreement,"
731, California Institute of Technology, Division of the Humanities and Social Sciences.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Innes, Robert & Sexton, Richard J, 1994. "Strategic Buyers and Exclusionary Contracts," American Economic Review, American Economic Association, vol. 84(3), pages 566-584, June.
- Lawrence M. Ausubel & Peter Cramton, 1998. "The Optimality of Being Efficient," Papers of Peter Cramton 98wpoe, University of Maryland, Department of Economics - Peter Cramton, revised 18 Jun 1999.
- Laffont, Jean-Jacques & Martimort, David, 1998.
"Mechanism Design with Collusion and Correlation,"
IDEI Working Papers
81, Institut d'Économie Industrielle (IDEI), Toulouse.
- Sandro Brusco & Giuseppe Lopomo, 2004.
"Collusion via Signalling in Simultaneous Ascending Bid Auctions with Heterogeneous Objects, with and without Complementarities,"
122247000000000385, UCLA Department of Economics.
- Sandro Brusco & Giuseppe Lopomo, 2002. "Collusion via Signalling in Simultaneous Ascending Bid Auctions with Heterogeneous Objects, with and without Complementarities," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 407-436.
- Innes, Robert & Sexton, Richard J., 1993. "Customer coalitions, monopoly price discrimination and generic entry deterrence," European Economic Review, Elsevier, vol. 37(8), pages 1569-1597, December.
- Varian, Hal R, 2000. "Buying, Sharing and Renting Information Goods," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 473-488, December.
- Jean-Jacques Laffont & David Martimort, 1997.
"Collusion under Asymmetric Information,"
Econometric Society, vol. 65(4), pages 875-912, July.
- Bernard Caillaud & Philippe Jehiel, 1998. "Collusion in Auctions with Externalities," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 680-702, Winter.
- Bakos, Yannis & Brynjolfsson, Erik & Lichtman, Douglas, 1999. "Shared Information Goods," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 117-55, April.
- Patrick Rey & Jean Tirole, 1985. "The Logic of Vertical Restraints," Working papers 396, Massachusetts Institute of Technology (MIT), Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:36:y:2005:2:p:337-360. 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: ()
If references are entirely missing, you can add them using this form.