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On the Optimal Pricing Policy of a Monopolist

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  • Wilson, Charles A

Abstract

This paper presents a simple explanation of price dispersion by a monopolist assu ming only that consumers arrive in a random order and are served on a first-come-first-served basis. A firm can sometimes increase its pro fits by charging two different prices for the same good and rationing sales at the lower price. However, it is never necessary to charge m ore than two prices, and a single price is sufficient as long as eith er the marginal revenue curve is everywhere downward sloping or the m arginal cost of production is constant. Copyright 1988 by University of Chicago Press.

Suggested Citation

  • Wilson, Charles A, 1988. "On the Optimal Pricing Policy of a Monopolist," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 164-176, February.
  • Handle: RePEc:ucp:jpolec:v:96:y:1988:i:1:p:164-76
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    Cited by:

    1. Che, Yeon-Koo & Gale, Ian, 2000. "The Optimal Mechanism for Selling to a Budget-Constrained Buyer," Journal of Economic Theory, Elsevier, vol. 92(2), pages 198-233, June.
    2. Wedad Elmaghraby & Altan Gülcü & P{i}nar Keskinocak, 2008. "Designing Optimal Preannounced Markdowns in the Presence of Rational Customers with Multiunit Demands," Manufacturing & Service Operations Management, INFORMS, vol. 10(1), pages 126-148, June.
    3. Felix Oberholzer-Gee, 2003. "A Market for Time: Fairness and Efficiency in Waiting Lines," CREMA Working Paper Series 2003-04, Center for Research in Economics, Management and the Arts (CREMA).
    4. Spiegler, Ran, 2006. "Competition over agents with boundedly rational expectations," Theoretical Economics, Econometric Society, vol. 1(2), pages 207-231, June.
    5. Philippe Choné & Romain De Nijs & Lionel Wilner, 2012. "Intertemporal Pricing with Unobserved Consumer Arrival Times," Working Papers 2012-23, Center for Research in Economics and Statistics.
    6. Nocke, Volker & Peitz, Martin & Rosar, Frank, 2011. "Advance-purchase discounts as a price discrimination device," Journal of Economic Theory, Elsevier, vol. 146(1), pages 141-162, January.
    7. Li, Michael Z. F., 2001. "Pricing non-storable perishable goods by using a purchase restriction with an application to airline fare pricing," European Journal of Operational Research, Elsevier, vol. 134(3), pages 631-647, November.
    8. Volker Nocke & Martin Peitz, 2003. "Monopoly Pricing under Demand Uncertainty: Final Sales versus Introductory ffers," PIER Working Paper Archive 03-002, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    9. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, March.
    10. Malighetti, Paolo & Paleari, Stefano & Redondi, Renato, 2009. "Pricing strategies of low-cost airlines: The Ryanair case study," Journal of Air Transport Management, Elsevier, vol. 15(4), pages 195-203.
    11. Xuanming Su, 2010. "Optimal Pricing with Speculators and Strategic Consumers," Management Science, INFORMS, vol. 56(1), pages 25-40, January.
    12. David, Laurent & Le Breton, Michel & Merillon, Olivier, 2007. "Regulating the Natural Gas Transportation Industry: Optimal Pricing Policy of a Monopolist with Advance-Purchase and Spot Markets," IDEI Working Papers 488, Institut d'Économie Industrielle (IDEI), Toulouse.
    13. Chua, Geoffrey A. & Lim, Wei Shi & Yeo, Wee Meng, 2016. "Market structure and the value of overselling under stochastic demands," European Journal of Operational Research, Elsevier, vol. 252(3), pages 900-909.
    14. David, Laurent & Le Breton, Michel & Merillon, Olivier, 2007. "Public Utility Pricing and Capacity Choice with Stochastic Demand," IDEI Working Papers 489, Institut d'Économie Industrielle (IDEI), Toulouse.
    15. Xuanming Su, 2007. "Intertemporal Pricing with Strategic Customer Behavior," Management Science, INFORMS, vol. 53(5), pages 726-741, May.
    16. Li, Michael Z. F., 2005. "Pricing non-storable perishable goods by using a purchase restriction: General optimality results," European Journal of Operational Research, Elsevier, vol. 161(3), pages 838-853, March.
    17. Wei Shi Lim, 2009. "Overselling in a Competitive Environment: Boon or Bane?," Marketing Science, INFORMS, vol. 28(6), pages 1129-1143, 11-12.

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