A Pedagogical Note on Multitier Pricing Scheme.
This note derives a new formula for determining a monopolist’s optimal multitier pricing scheme for any given number of tiers. It further characterizes Gabor’s (Review of Economic Studies) two-tier pari passu marginal revenue function to the <named-content> n </named-content>-tier case. By introduci...
| Published in: | American Economist Vol. 63; no. 2; pp. 228 - 245 |
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| Main Authors: | , |
| Format: | Article |
| Published: |
Sage Publications Inc.
Oct2018
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| Subjects: | |
| Online Access: | View this record in EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=hlh&AN=131498708&site=ehost-live header: @attributes: shortDbName: hlh uiTerm: 131498708 longDbName: Humanities International Complete uiTag: AN controlInfo: bkinfo: jinfo: jid: 05694345 AEC jtl: American Economist issn: 05694345 maglogo: N pubinfo: dt: Oct2018 vid: 63 iid: 2 pid: 344 pub: Sage Publications Inc. artinfo: ui: 131498708 10.1177/0569434517745311 ppf: 228 ppct: 17 formats: tig: atl: A Pedagogical Note on Multitier Pricing Scheme. aug: au: Chang, Winston W. Chen, Tai-Liang affil: The State University of New York at Buffalo, USA Zhongnan University of Economics and Law, Wuhan, China su: Pricing Monopolistic competition Price discrimination Public utilities Public welfare Economics sug: subj: Pricing Monopolistic competition Price discrimination Public utilities Public welfare Economics keyword: monopoly multitier pricing public utility pricing second-degree price discrimination social welfare ab: This note derives a new formula for determining a monopolist’s optimal multitier pricing scheme for any given number of tiers. It further characterizes Gabor’s (Review of Economic Studies) two-tier pari passu marginal revenue function to the <named-content> n </named-content>-tier case. By introducing the individual tier’s marginal revenue and the pari passu marginal revenue in a linear demand case, this note provides a perceptive graphical representation of the optimal pricing scheme, revealing that all tiers’ outputs are equal, the last tier’s price is always higher than the marginal cost, and an increase in the number of tiers increases social welfare. In a class of nonlinear demand functions, it shows that starting from the first tier, the tiers’ outputs are monotonically increasing (decreasing) if the demand function is strictly convex (concave). It also shows that the equal-tier-output property preserves in the linear demand case with the total output fixed as a constraint.JEL Classification: D01, D21, D42, L12, L21 pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: Y dt: @attributes: year: 2018 holdings: @attributes: islocal: N |
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