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Price Discrimination by a Many-Product Firm

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Author Info
Armstrong, Mark

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Abstract

Determining the optimal selling strategy for a multiproduct firm facing consumers with unobservable tastes is a difficult task. This paper aims to show how almost optimal nonlinear tariffs can often be found when the number of products is large. Moreover, such tariffs take a simple form: (1) when taste parameters are independently distributed across products, the almost optimal tariff is a single cost-based, two-part tariff that can extract virtually all consumer surplus; (2) when tastes are correlated across products, perhaps because of income differences across consumers, the almost optimal tariff can be implemented as a menu of two-part tariffs, each of which has prices proportional to marginal costs. Copyright 1999 by The Review of Economic Studies Limited.

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 66 (1999)
Issue (Month): 1 (January)
Pages: 151-68
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Handle: RePEc:bla:restud:v:66:y:1999:i:1:p:151-68

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  1. Matthew O. Jackson & Hugo F. Sonnenschein, 2003. "The Linking of Collective Decisions and Efficiency," Microeconomics 0303007, EconWPA. [Downloadable!]
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  2. Carla Marchese, 2006. "The economic rationale for integrated tariffs in local public transport," The Annals of Regional Science, Springer, vol. 40(4), pages 875-885, December. [Downloadable!] (restricted)
  3. Hitoshi Matsushima & Koichi Miyazaki & Nobuyuki Yagi, 2006. "Role of Linking Mechanisms in Multitask Agency with Hidden Information," CIRJE F-Series CIRJE-F-401, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  4. Mark Armstrong & Helen Weeds, 2005. "Public Service Broadcasting in the Digital World," Industrial Organization 0507010, EconWPA. [Downloadable!]
  5. Gary-Bobo, Robert & Larribeau, Sophie, 2002. "A Structural Econometric Model of Price Discrimination in the Mortgage Lending Industry," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  6. Hanming Fang & Peter Norman, 2008. "Optimal Provision of Multiple Excludable Public Goods," NBER Working Papers 13797, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Suren Basov, 2002. "A Partial Characterization of the Solution of the Multidimensional Screening Problem with Nonlinear Preferences," Department of Economics - Working Papers Series 860, The University of Melbourne. [Downloadable!]
  8. domenico menicucci & doh-shin jeon, 2004. "bundling electronic journals and competition among publishers," Econometric Society 2004 Far Eastern Meetings 720, Econometric Society. [Downloadable!]
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  9. Archishman Chakraborty & Rick Harbaugh, 2002. "Credible Comparisons in Multi-Issue Bargaining," Claremont Colleges Working Papers 2002-04, Claremont Colleges. [Downloadable!]
  10. Fang, Hanming & Norman, Peter, 2004. "An Efficiency Rationale for Bundling of Public Goods," Micro Theory Working Papers norman-04-11-21-09-39-13, Microeconomics.ca Website, revised 08 Feb 2005. [Downloadable!]
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  11. Kyle Bagwell, 2006. "Signaling and entry deterrence: A multi-dimensional analysis," Discussion Papers 0506-16, Columbia University, Department of Economics. [Downloadable!]
  12. Yossi Spiegel & Simon Wilkie, 2000. "Optimal Multiproduct Nonlinear Pricing with Correlated Consumer Types," Discussion Papers 1299, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  13. Hitoshi Matsushiima, 2006. "Relative Performance Evaluation between Multitask Agents," CIRJE F-Series CIRJE-F-419, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  14. Fang, Hanming & Norman, Peter, 2005. "Overcoming Participation Constraints," Micro Theory Working Papers norman-05-04-22-05-35-30, Microeconomics.ca Website, revised 28 Apr 2005. [Downloadable!]
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  15. repec:att:wimass:1920319 is not listed on IDEAS
  16. Fang, Hanming & Norman, Peter, 2005. "To Bundle or Not to Bundle," Micro Theory Working Papers norman-05-06-10-08-19-02, Microeconomics.ca Website, revised 10 Jun 2005. [Downloadable!]
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  17. Friberg, Richard & Ganslandt, Mattias & Sandström, Mikael, 2001. "Pricing Strategies in E-Commerce: Bricks vs. Clicks," Working Paper Series 559, Research Institute of Industrial Economics. [Downloadable!]
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