Mathematical Miscalculations and Monopoly Pricing Strategies
Bryan C. McCannon
Saint Bonaventure University
Eastern Economic Journal, Vol. 35, Issue 2, pp. 248-263, 2009
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: 16Accepted Paper Series
Date posted: August 3, 2010
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