Consumers are commonly required to subscribe to particular tariff options before uncertainty regarding their future purchases gets resolved. Since the general comparison of welfare performance of different pricing mechanisms is ambiguous, this paper empirically evaluates the expected welfare associated to standard nonlinear pricing and optional tariffs by using information directly linked to th...

We characterize the optimal dynamic price policy of a monopolist who faces “viscous” demand for its services. Demand is viscous if it adjusts relatively slowly to price changes. We show that with the optimal policy the monopolist stops short of achieving 100% market penetration, even when all of the consumers have the same long-run willingness to pay for the service. Furthermore, for certain pa...

This paper finds an optimal mechanism for selling a good to a buyer who may be budget-constrained. We consider a seller with one unit of a good facing a buyer with a quasilinear utility function. If the buyer does not face a binding budget constraint, textbook monopoly pricing is optimal. By contrast, the possibility of a binding budget constraint can make it optimal for the seller to use nonli...

We document the existence of pricing styles in the concert industry. Artists differ in the extent to which they rely on secondand third-degree price discrimination and in how likely they are to sell out concerts. Most strikingly, artists who use multiple seating categories are more likely to vary prices across markets and less likely to sell out concerts. These patterns are difficult to explain...

This paper characterizes the optimal contract offered by an uninformed principal to an informed agent when the latter's reservation utility depends on his type. The informational rent is nonmonotonic so that interior types may have a vanishing rent or be excluded from trade. The paper identifies conditions for the optimal contract to be separating, to be nonstochastic, and to induce full partic...

An upstream manufacturer can use minimum resale price maintenance (RPM) to exclude potential competitors. RPM lets the incumbent manufacturer transfer profits to retailers. If entry is accommodated by retailers, upstream competition leads to fierce downstream competition and the breakdown of RPM. Thus, via RPM, retailers internalize the effect of accommodating entry on the incumbent’s profits. ...

We model the optimal behaviour of a multiproduct monopolist investing both in process and in product innovation in a dynamic setting. Product innovation reduces the degree of substitutability between any two varieties. First, we find that R&D efforts increase in both directions as the number of varieties grows. Second, we characterise the relative intensity of R&D activities according to the re...

The increasing hazard rate (IHR) property of distributions of asymmetric information parameters play a critical role in characterizing a separating Perfect Bayesian–Nash Equilibria in screening problems. This paper studies sufficient conditions on these distributions for IHR to be preserved under convolution. When different sources of asymmetric information aggregate into a single scalar, these...

This paper studies a class of multidimensional screening models where different type dimensions lie on the real line. The paper applies preservation results of totally positive functions to show that some critical properties of the distributions of asymmetric information parameters, such as increasing hazard rate, monotone likelihood ratio, and unimodality are preserved under convolution and/or...

This paper studies optimal nonlinear pricing for a monopolist when consumers’ preferences exhibit temptation and self-control as in Gul and Pesendorfer (2001a). Consumers are subject to temptation inside the store but exercise self-control, and those foreseeing large self-control costs do not enter the store. Consumers differ in their preferences under temptation. When all consumers are tempted...