TY - GEN
T1 - Menu implementability and practical pricing schemes
AU - WONG, Chi Leung, Adam
PY - 2011/8/24
Y1 - 2011/8/24
N2 - In the context of monopolistic nonlinear pricing, we compare the maximum profits of bundling, incremental discounts, and all-units discounts. When the number of pricing blocks is unrestricted, incremental discounts perform weakly the worst. However, if the performance of incremental discounts is not strictly worse when the number of blocks is unrestricted, then it performs the best when the number of blocks is restricted. It is because incremental discounts have the smallest "implementation power" and the largest "approximation power". These results are applications of our general theory of menu implementability, which characterizes the set of outcomes implementable by a menu of tariff options, where the set of admissible tariff options and the number of tariff options in the menu are pre-determined.
AB - In the context of monopolistic nonlinear pricing, we compare the maximum profits of bundling, incremental discounts, and all-units discounts. When the number of pricing blocks is unrestricted, incremental discounts perform weakly the worst. However, if the performance of incremental discounts is not strictly worse when the number of blocks is unrestricted, then it performs the best when the number of blocks is restricted. It is because incremental discounts have the smallest "implementation power" and the largest "approximation power". These results are applications of our general theory of menu implementability, which characterizes the set of outcomes implementable by a menu of tariff options, where the set of admissible tariff options and the number of tariff options in the menu are pre-determined.
KW - Nonlinear pricing
KW - Bundling
KW - Incremental discounts
KW - All-units discounts
KW - Incentive-compatible mechanisms
UR - https://commons.ln.edu.hk/sw_master/4496
U2 - 10.2139/ssrn.1915752
DO - 10.2139/ssrn.1915752
M3 - Other outputs
T3 - Social Science Research Network
ER -