Seminar in Microeconomics - Nenad Kos (Bocconi University)

Pricing and Consumer Surplus in Monopoly with Product Design

Tuesday 5 November 2024 - 11h00 to 12h15 - General public

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The model considers a monopolist who optimally chooses the design and price of a product on the Hotelling line. We characterize the set of prices and consumer surplus that can arise in the model across all distributions of tastes. In a stark departure from the monopoly model without product design, the seller never offers a price below a certain threshold. Moreover, the maximal consumer surplus is strictly smaller than in the absence of product design. It is attained by a distribution that renders the seller indifferent over a set of design/price combinations. Notably, the distribution does not exhibit unit elasticity given any fixed design.

Published from 23 August 2024 to 6 November 2024
Joao Montez
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