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Competitive and revenue-optimal pricing with budgets

Author

Listed:
  • Finster, Simon

    (Department of Statistics, CREST, and Inria/FairPlay Now)

  • Goldberg, Paul W.

    (Department of Computer Science, University of Oxford)

  • Lock, Edwin

    (Departments of Computer Science and Economics, University of Oxford)

Abstract

In markets with budget-constrained buyers, competitive equilibria need not be efficient in the utilitarian sense, or maximise the seller's revenue. We consider a setting with multiple divisible goods. Competitive equilibrium outcomes, and only those, are constrained utilitarian efficient, a notion of utilitarian efficiency that respects buyers' demands and budgets. Our main contribution establishes that, when buyers have linear valuations, competitive equilibrium prices are unique and revenue-optimal for a zero-cost seller.

Suggested Citation

  • Finster, Simon & Goldberg, Paul W. & Lock, Edwin, 0. "Competitive and revenue-optimal pricing with budgets," Theoretical Economics, Econometric Society.
    • Handle: RePEc:the:publsh:5913
    as

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    More about this item

    Keywords

    Competitive equilibrium; revenue maximisation; efficiency; market design; budget constraints; Fisher market; product-mix auction; arctic auction;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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