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STICERD Economic Theory Seminars

The Optimality of Constant Mark-Up Pricing

Stephen Morris (Massachusetts Institute of Technology), joint with Dirk Bergemanny and Tibor Heumannz

Thursday 15 June 2023 15:30 - 17:00

Many of our seminars and public events this year will continue as in person or as hybrid (online and in person) events. Please check our website listings and Twitter feed @STICERD_LSE for updates.

Unless otherwise specified, in-person seminars are open to the public.

Those unable to join the seminars in-person are welcome to participate via zoom if the event is hybrid.


About this event

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 proÖts 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.

Economic Theory Seminars are held on Thursdays in term time at 15:30-17:00, both ONLINE and IN PERSON in SAL 3.05.

Seminar organisers: Dr Andrew Ellis and Dr Christopher Sandmann.

For further information please contact Sadia Ali: s.ali43@lse.ac.uk.

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