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A Critique on the Theory of Linear Price Monopoly



We show that the absence of friction between consumers is not sufficient for linear pricing by a monopolist. On the contrary, it is shown that this situation allows the monopolist to achieve perfect discrimination.

Suggested Citation

  • Nir Dagan, 1998. "A Critique on the Theory of Linear Price Monopoly," Economic theory and game theory 016, Nir Dagan, revised 25 Sep 1998.
  • Handle: RePEc:nid:ndagan:016

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    References listed on IDEAS

    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, vol. 43(3), pages 513-518, May.
    3. Chun, Youngsub & Thomson, William, 1990. "Nash solution and uncertain disagreement points," Games and Economic Behavior, Elsevier, vol. 2(3), pages 213-223, September.
    4. Marco Mariotti, 1999. "Fair Bargains: Distributive Justice and Nash Bargaining Theory," Review of Economic Studies, Oxford University Press, vol. 66(3), pages 733-741.
    5. Marco Mariotti, 2000. "Maximal symmetry and the Nash solution," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 17(1), pages 45-53.
    6. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    7. Thomson, William, 1994. "Cooperative models of bargaining," Handbook of Game Theory with Economic Applications,in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 35, pages 1237-1284 Elsevier.
    8. Ehud Kalai & Robert W. Rosenthal, 1976. "Arbitration of Two-Party Disputes Under Ignorance," Discussion Papers 215, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    9. Eric van Damme, 1984. "The Nash Bargaining Solution is Optimal," Discussion Papers 597, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    10. Peters, Hans J M, 1986. "Simultaneity of Issues and Additivity in Bargaining," Econometrica, Econometric Society, vol. 54(1), pages 153-169, January.
    11. Lensberg, Terje, 1988. "Stability and the Nash solution," Journal of Economic Theory, Elsevier, vol. 45(2), pages 330-341, August.
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    More about this item


    Monopoly; linear pricing; friction; price discrimination;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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