SFB 303 Discussion Paper No. A - 174

Author: Ebert, Udo
Title: Non-uniform Prices under Profit Maximization
Abstract: The paper is concerned with a profit maximizing monopolist who charges different purchasers different prices. The amount consumers have to pay depends on the quantity purchased. This form of pricing is only possible if the product sold in that market is not resellable, an assumption which is often justified. Examples are transportation or communication services and utilities. Purchasers differ in one characteristic, namely in income. The monopolist cannot observe this characteristic directly. Therefore he cannot make the price dependent on the consumers's income. He has to construct a non-uniform pricing scheme which is the same for all consumers. Since he knows the distribution of income, the monopolist can use the scheme as sorting mechanism and achieve a discrimination which is in general not perfect.
Keywords:
JEL-Classification-Number:
Creation-Date: June 1988
Unfortunately this paper is not available online. Please contact us to order a hardcopy.

SFB 303 Homepage

26.10.1999, Webmaster