Personalized prices and uncertainty in monopsony |
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| Institution: | 1. University of Central Florida, United States;2. The University of Edinburgh, Scotland;3. Universitat de les Illes Balears, Spain;1. Institute of Economic Analysis, CSIC, Spain;2. Barcelona GSE, Spain;1. Department of Economics, University of Melbourne, Level 4, FBE Building, 111 Barry Street, Victoria 3010, Australia;2. Fuqua School of Business, Duke University, 100 Fuqua Drive, Durham, NC 27708, USA;1. Department of Economics, Stony Brook University, Stony Brook, USA;2. The Interdisciplinary Center, Herzliya, Israel;3. School of Mathematical Sciences, Tel Aviv University, Israel;1. Universitat de les Illes Balears, Spain;2. Universitat de les Illes Balears, Spain and The University of Edinburgh, UK |
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| Abstract: | We analyze personalized pricing by a monopsonist facing a finite number of ex ante identical, capacity constrained suppliers with privately known costs. When the distribution of costs is sufficiently smooth and regular, the buyer chooses to make the same offer to all suppliers, leading to a posted price. When demand is sufficiently concave (convex) this price is lower (higher) than the classical monopsony price. In the limit as the seller capacities tend to zero, we obtain the classical monopsony price. Therefore, our model provides a decentralized micro-foundation for monopsony. |
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