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Optimal selling mechanisms for multiproduct monopolists : incentive compatibility in the presence of budget constraints

  • KLINGER MONTEIRO , Paulo

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

  • PAGE, Frank H. Jr.

    (Department of Finance, University of Alabama, Tuscaloosa, US)

We demonstrate the existence of an optimal, individually rational, and incentive compatible selling mechanism for a multiproduct monopolist facing a market populated by consumers with budget constraints. Our main contribution is to show that, in general, when facing consumers with budget constraints the monopolist is able to maximize profits over the set of individually rational and incentive compatible selling mechanisms only if other goods are available and only if the monopolist’s goods are nonessential relative to other goods.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1997011.

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Date of creation: 01 Feb 1997
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Handle: RePEc:cor:louvco:1997011
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  1. Spulber Daniel F., 1993. "Monopoly Pricing," Journal of Economic Theory, Elsevier, vol. 59(1), pages 222-234, February.
  2. Wilson, Robert, 1996. "Nonlinear pricing and mechanism design," Handbook of Computational Economics, in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 5, pages 253-293 Elsevier.
  3. Laffont, Jean-Jacques & Robert, Jacques, 1996. "Optimal auction with financially constrained buyers," Economics Letters, Elsevier, vol. 52(2), pages 181-186, August.
  4. Paulo Klinger Monteiro, 1994. "A New Proof Of The Existence Of Equilibrium In Incomplete Markets Economies," GE, Growth, Math methods 9410001, EconWPA.
  5. McAfee, R. Preston & McMillan, John, 1988. "Multidimensional incentive compatibility and mechanism design," Journal of Economic Theory, Elsevier, vol. 46(2), pages 335-354, December.
  6. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
  7. Page, Frank H, Jr, 1992. "Mechanism Design for General Screening Problems with Moral Hazard," Economic Theory, Springer, vol. 2(2), pages 265-81, April.
  8. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
  9. 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.
  10. Artstein, Zvi, 1979. "A note on fatou's lemma in several dimensions," Journal of Mathematical Economics, Elsevier, vol. 6(3), pages 277-282, December.
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