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Competitive and Revenue-Optimal Pricing with Budgets

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  • Simon Finster
  • Paul Goldberg
  • Edwin Lock

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. Firstly, we show that competitive equilibrium outcomes, and only those, are constrained utilitarian efficient, a notion of utilitarian efficiency that respects buyers' demands and budgets. Secondly, we establish that, when buyers have linear valuations, competitive equilibrium prices are unique and revenue-optimal for a zero-cost seller.

Suggested Citation

  • Simon Finster & Paul Goldberg & Edwin Lock, 2023. "Competitive and Revenue-Optimal Pricing with Budgets," Papers 2310.03692, arXiv.org, revised Jan 2025.
    • Handle: RePEc:arx:papers:2310.03692
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    File URL: http://arxiv.org/pdf/2310.03692
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