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Abstract for:

Optimal Selling Procedures with Fixed Costs

Francesca Cornelli,   1992
Paper No' TE/1992/257:
Paper copy now out of print.

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 customers. The monopolist therefore sets a minimum price and then lets each customer contribute as much as he wishes.