Optimal Selling Procedures with Fixed Costs

doi:10.1006/jeth.1996.0106

Journal of Economic Theory

Volume 71, Issue 1, October 1996, Pages 1-30

https://doi.org/10.1006/jeth.1996.0106 Get rights and content

Abstract

This paper studies the optimal selling procedures for a monopolist, when consumers valuations are unknown and there are fixed costs. The fixed costs introduce a positive externality among customers: each customer benefits from the presence of others who help cover the fixed costs. In this context it is optimal for the monopolist to make the probability of each individual being served contingent on the valuations of all the other consumers. The monopolist therefore sets a minimum price and then lets each customer contribute as much as he wishes.Journal of Economic LiteratureClassification Numbers: D44, D82, L31.

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^☆: I thank Patrick Bolton, Richard Caves, Jim Dana, Walter Elberfeld, Michele Grillo, Chris Harris, Sergiu Hart, Paul Klemperer, Ben Polak, Serge Marquié, Preston McAfee, Andreu Mas-Colell, Roberto Serrano, Lars Stole, Oved Yosha, Mike Whinston, and especially Leonardo Felli, Jerry Green, Eric Maskin, and Kathy Spier. Several improvements are due to the suggestions of anonymous referees. Financial support from a Sloan Foundation Dissertation Fellowship is gratefully acknowledged. Errors remain my own responsibility.

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Regular ArticleOptimal Selling Procedures with Fixed Costs☆

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Optimal Selling Procedures with Fixed Costs☆