Working Paper: CEPR ID: DP5166
Authors: Gerard J. van den Berg
Abstract: This paper considers price determination by monopolistic sellers who know the distribution of valuations among the potential buyers. We derive a novel condition under which the optimal price set by the monopolist is unique. In many settings, this condition is easy to interpret, and it is valid for a very wide range of distributions of valuations. The results carry over to the optimal minimum price in independent private value auctions. In addition, they can be fruitfully applied in the analysis of quantity discount price policies.
Keywords: auction; hazard rate; local maxima; minimum price; monopoly; quantity discount; regularity; reservation price
JEL Codes: D42; D44; L12; L42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| distribution of valuations (D39) | uniqueness of optimal price (D41) |
| increasing proportionate failure rate condition (C62) | uniqueness of optimal price (D41) |
| hazard rate of the distribution of valuations is strictly increasing (D39) | uniqueness of optimal price (D41) |