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Retail Pricing and Clearance Sales: The Multidimensional Case

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  • Mariano Runco

    (Auburn University at Montgomery)

Abstract

In this paper I generalize Lazear's model (1986) of retail pricing to the case of a monopolist selling two goods to a potential buyer with unknown valuations. The optimal prices and profit levels are computed for different distributions of valuations using Monte-Carlo simulations. Preliminary results show that the decrease in profits of the suboptimal pure bundling strategy (where the firm has to set only 2 prices) in both periods is extremely small relative to the profits of the optimal mixed bundling strategy (where the firm has to set 6 prices).

Suggested Citation

  • Mariano Runco, 2012. "Retail Pricing and Clearance Sales: The Multidimensional Case," Economics Bulletin, AccessEcon, vol. 32(1), pages 376-381.
    • Handle: RePEc:ebl:ecbull:eb-11-00642
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    References listed on IDEAS

    as
    1. Manelli, Alejandro M. & Vincent, Daniel R., 2007. "Multidimensional mechanism design: Revenue maximization and the multiple-good monopoly," Journal of Economic Theory, Elsevier, vol. 137(1), pages 153-185, November.
    2. Runco Mariano G, 2010. "A Note on the Multidimensional Monopolist Problem and Intertemporal Price Discrimination," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-8, August.
    3. Tyner, Wally & Adams, John, 1976. "Rural Electrification In India: Biogas Versus Large Scale Power," 1976 Annual Meeting, August 15-18, State College, Pennsylvania 283822, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(3), pages 475-498.
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    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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