The Optimality of Constant Mark-Up Pricing
We consider a nonlinear pricing environment with private information. We provide profit guarantees (and associated mechanisms) that the seller can achieve across all possible distributions of willingness to pay of the buyers. With a constant elasticity cost function, constant markup pricing provides the optimal revenue guarantee across all possible distributions of willingness to pay and the lower bound is attained under a Pareto distribution. We characterize how profits and consumer surplus vary with the distribution of values and show that Pareto distributions are extremal. We also provide a revenue guarantee for general cost functions. We establish equivalent results for optimal procurement policies that support maximal surplus guarantees for the buyer given all possible cost distributions of the sellers.
Code (0)
등록된 구현이 없습니다.
Tasks
AllSimilar Papers 제목 키워드 기반
On the limits of informationally efficient stock markets: New insights from a chartist-fundamentalist model
We utilize a chartist-fundamentalist model to examine the limits of informationally efficient stock markets. In our model, chartists are permanently active in the stock market, while fundamentalists trade only when their…
Minimax Optimality in Contextual Dynamic Pricing with General Valuation Models
Dynamic pricing, the practice of adjusting prices based on contextual factors, has gained significant attention due to its impact on revenue maximization. In this paper, we address the contextual dynamic pricing problem,…
Risk-Neutral Pricing and Hedging of In-Play Football Bets
A risk-neutral valuation framework is developed for pricing and hedging in-play football bets based on modelling scores by independent Poisson processes with constant intensities. The Fundamental Theorems of Asset Pricin…
Transfer Learning for Nonparametric Contextual Dynamic Pricing
Dynamic pricing strategies are crucial for firms to maximize revenue by adjusting prices based on market conditions and customer characteristics. However, designing optimal pricing strategies becomes challenging when his…
Transfer LearningPricing Economic Dispatch with AC Power Flow via Local Multipliers and Conic Relaxation
We analyze pricing mechanisms in electricity markets with AC power flow equations that define a nonconvex feasible set for the economic dispatch problem. Specifically, we consider two possible pricing schemes. The first …