On The Dynamic Incentive of Price-Quality Differentiation By A Monopolist Firm
When consumers are theterogeneous in their preferences about the quality of a product, a monopolist firm can take advantage of this heterogeneity, thereby, increase the profit by offering different price-quality pairs. This business practice is called the second degree price discrimination or non-linear pricing. This paper extends the static non-linear pricing problem into the dynamic one where the monopolist firm cannot precommit in advance. The main result is that the dynamic non-linear pricing outcome is the same as the static non-linear pricing outcome so that additional opportunities to transact neither benefits nor hurts the monopolist firm. [L12]
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Volume (Year): 14 (2000)
Issue (Month): 1 ()
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References listed on IDEAS
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- Wilson, Robert, 1997. "Nonlinear Pricing," OUP Catalogue, Oxford University Press, number 9780195115826, December.
- Steven Matthews & John Moore, 1985.
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- Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
- A. Michael Spence, 1980. "Multi-Product Quantity-Dependent Prices and Profitability Constraints," Review of Economic Studies, Oxford University Press, vol. 47(5), pages 821-841.
- Roberts, Kevin W S, 1979. "Welfare Considerations of Nonlinear Pricing," Economic Journal, Royal Economic Society, vol. 89(353), pages 66-83, March.
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