Document Type
Discussion Paper
Publication Date
11-1-2010
CFDP Number
1775
CFDP Pages
12
Abstract
We analyze the canonical nonlinear pricing model with limited information. A seller offers a menu with a finite number of choices to a continuum of buyers with a continuum of possible valuations. By revealing an underlying connection to quantization theory, we derive the optimal finite menu for the socially efficient and the revenue-maximizing mechanism. In both cases, we provide an estimate of the loss resulting from the usage of a finite n-class menu. We show that the losses converge to zero at a rate proportional to 1/n2 asn becomes large.
Recommended Citation
Bergemann, Dirk; Shen, Ji; Xu, Yun; and Yeh, Edmund M., "Mechanism Design with Limited Information: The Case of Nonlinear Pricing" (2010). Cowles Foundation Discussion Papers. 2116.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2116