Mathematical Miscalculations and Monopoly Pricing Strategies

Abstract:     
Economic models focus on prices that announce a cost for one unit. Often prices assigning a cost for multiple units are chosen. For either, any quantity can be purchased at a constant per unit price. I incorporate the experimental phenomenon of mathematical miscalculations to explain the use of both linear pricing strategies. When calculating the per unit price, an error may lead a consumer to either purchase mistakenly or not purchase a unit when she should. These two consequences distinguish the two. Furthermore, I show that announcing a price for multiple units, in certain environments, outperforms non-linear prices.

Number of Pages in PDF File: 16

Accepted Paper Series