Optimal Multiproduct Nonlinear Pricing with Correlated Consumer Types

25 Pages Posted: 1 Aug 2000

See all articles by Yossi Spiegel

Yossi Spiegel

Tel Aviv University, Coller School of Management; Centre for Economic Policy Research (CEPR); ZEW – Leibniz Centre for European Economic Research

Simon Wilkie

California Institute of Technology

Date Written: June 2000

Abstract

In this paper we examine the design of nonlinear prices by a multiproduct monopolist who faces customers with multidimensional but correlated types. We show that the monopoly can exploit the correlations between consumers' types to design pricing mechanisms that fully extract the surplus from each consumer. Our main insight is that regardless of the dimensionality of the consumers types and the number of goods produced by the monopoly, the surplus that each consumer gets after buying is a scalar. Hence, it is possible to design a two step mechanism where in the first step the monopoly induces the consumers to make efficient purchasing decisions (given their private information), and in the second step he extracts the surplus from each consumer via a (random) fixed fee.

Keywords: nonlinear prices, multidimensional types, correlated types, incremental cost, Clarke-Groves mechanisms

JEL Classification: D42, D82

Suggested Citation

Spiegel, Yossi and Wilkie, Simon, Optimal Multiproduct Nonlinear Pricing with Correlated Consumer Types (June 2000). Available at SSRN: https://ssrn.com/abstract=235317 or http://dx.doi.org/10.2139/ssrn.235317

Yossi Spiegel (Contact Author)

Tel Aviv University, Coller School of Management ( email )

Ramat Aviv, Tel Aviv, 69978
Israel
972-3-640-9063 (Phone)
972-3-640-7739 (Fax)

HOME PAGE: http://www.tau.ac.il/~spiegel

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Simon Wilkie

California Institute of Technology ( email )

Pasadena, CA 91125
United States

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