Haggling over substitutes

Thanassoulis, John

doi:10.1016/j.jet.2003.09.002

Cited by 155 publications

(100 citation statements)

References 9 publications

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“…The complexity of the particular admission rules that they obtain may be due to their working with a two-point distribution of preference parameters. 15 However, the work of Thanassoulis (2004), as well as Manelli and Vincent (2006 a, b) on the closely related problem of pro…t maximization by a multi-product monopolist suggests that, for m > 1; nonseparability and genuine randomization in admissions are the rule, rather than the exception. 16 1 4 If the function !…”

Section: The Problem Of the Second-bestmentioning

confidence: 99%

The provision and pricing of excludable public goods: Ramsey–Boiteux pricing versus bundling

Hellwig

2007

Journal of Public Economics

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This paper studies the relation between Bayesian mechanism design and the Ramsey-Boiteux approach to the provision and pricing of excludable public goods. For a large economy with private information about individual preferences, the two approaches are shown to be equivalent if and only if, in addition to incentive compatibility and participation constraints, the …nal allocation of private-good consumption and admission tickets to public goods satis…es a condition of renegotiation proofness. Without this condition, a mechanism involving mixed bundling, i.e. combination tickets at a discount, is superior.

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Section: The Problem Of the Second-bestmentioning

confidence: 99%

The provision and pricing of excludable public goods: Ramsey–Boiteux pricing versus bundling

Hellwig

2007

Journal of Public Economics

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“…While it is well known that the optimal strategy for selling a single good is to post a 'take-it-or-leave-it' price (Riley and Zeckhauser (1983)), solving for the case of several goods proved to be much harder because of a multidimensional nature of the problem. 1 The main insights into economics of multiproduct price discrimination are the following: (i) the seller generally benefits from excluding a subset of the buyer's types from purchasing any goods (Armstrong (1996)); (ii) the seller generally benefits from offering bundles of goods at a discount in addition to the individually priced goods (Adams and Yellen (1976), McAfee, McMillan and Whinston (1989)); (iii) unlike in the case of a single good, the seller often benefits from using lotteries as a part of the optimal selling mechanism (Thanassoulis (2004), Vincent (2006, 2007)). …”

Section: Introductionmentioning

confidence: 99%

Optimal Mechanism for Selling Two Goods

Pavlov¹

2011

The B.E. Journal of Theoretical Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe solve for the optimal mechanism for selling two goods when the buyer's demand characteristics are unobservable. In the case of substitutable goods, the seller has an incentive to offer lotteries over goods in order to charge the buyers with large differences in the valuations a higher price for obtaining their desired good with certainty. However, the seller also has a countervailing incentive to make the allocation of the goods among the participating buyers more efficient in order to increase the overall demand. In the case when the buyer can consume both goods, the seller has an incentive to underprovide one of the goods in order to charge the buyers with large valuations a higher price for the bundle of both goods. As in the case of substitutable goods, the seller also has a countervailing incentive to lower the price of the bundle in order to increase the overall demand.

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“…Finally, Thanassoulis (2004) studies the problem of a multi-product monopolist selling two substitute goods to risk-neutral consumers with unit demand, and derives conditions such that the optimal tari¤ includes lotteries. 42 In my model, when the seller endogenously reduces the availability of the goods, from the consumers'point of view this is equivalent to taking a lottery on both which good they will 4 1 Related, but somewhat di¤erent explanations for the use of loss leaders are advanced by DeGraba (2006) and Chen and Rey (2012).…”

Section: Related Literaturementioning

confidence: 99%

Selling substitute goods to loss‐averse consumers: limited availability, bargains, and rip‐offs

Rosato

2016

The RAND J of Economics

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Why are some sale items subject to limited availability while other substitute items are available in large quantities and are priced relatively high at the same point in time? Can such a retail strategy lure consumers into purchasing the more expensive item? This paper characterizes the pro…t-maximizing pricing and product-availability strategies for a retailer selling two substitute goods to loss-averse consumers and shows that limited-availability sales can manipulate consumers into an ex-ante unfavorable purchase. Consumers have unit demand, are interested in buying only one good, and their reference point is given by their recent rational expectations about what consumption value they would receive and what price they would pay. The seller maximizes pro…ts by raising the consumers'reference point through a tempting discount on a good available only in limited supply (the bargain) and cashing in with a high price on the other good (the rip-o¤), which the consumers buy if the bargain is not available to minimize their disappointment. The seller might prefer to o¤er a deal on the more valuable product, using it as a bait, because consumers feel a larger loss, in terms of forgone consumption, if this item is not available. I also show that the bargain item can be a loss leader, that the seller's product line is not welfare-maximizing and that she might supply a socially wasteful product. The model suggests that the current FTC Guides Against Bait Advertising, by allowing retailers to employ limited-availability sales, could reduce consumer and social welfare.JEL classi…cation: D11; D42; L11.

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Haggling over substitutes

Cited by 155 publications

References 9 publications

The provision and pricing of excludable public goods: Ramsey–Boiteux pricing versus bundling

The provision and pricing of excludable public goods: Ramsey–Boiteux pricing versus bundling

Optimal Mechanism for Selling Two Goods

Selling substitute goods to loss‐averse consumers: limited availability, bargains, and rip‐offs

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