Nonlinear Pricing: Capturing Consumer Surplus

  • Michael R. Hammock
  • J. Wilson Mixon


Chapter 12 shows how a price-searching firm maximizes profits if its product faces a well-defined downward-sloping demand curve, given that the firm must sell all units of its product for the same price and that the per-unit price is the only charge that the seller can impose on the product’s buyers. This pricing regime is often called linear pricing. This chapter analyzes deviations from linear pricing, which potentially increase the seller’s profit.


Marginal Cost Consumer Surplus Price Discrimination Marginal Revenue Nonlinear Price 
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  1. 1.
    Wilson RB (1997) Nonlinear pricing. Oxford University Press, New YorkGoogle Scholar

Further Readings

  1. The table in the preface lists chapters in microeconomics textbooks that relate to this chapter. The following can also be of value:Google Scholar
  2. Anderson ET, Dana JD (2009) When is price discrimination profitable? Manage Sci 55:980–989. The paper develops a framework for analyzing many important types of price discrimination: intertemporal price discrimination, damaged goods, advance purchase discounts, coupons (rebates), and information goods (list taken from the paper).Google Scholar
  3. McAfee RP (2007) Pricing damaged goods. Economics Discussion Papers, No 2007-2, Kiel Institute for the World Economy. This paper shows how firms can segment markets by impairing some units its product and selling them at a reduced price. It presents numerous examples. A paper by Deneckere and McAfee (1996), cited in this paper, contains additional examples.

Copyright information

© Springer Science+Business Media, LLC 2013

Authors and Affiliations

  • Michael R. Hammock
    • 1
  • J. Wilson Mixon
    • 2
  1. 1.Department of Economics and FinanceMiddle Tennessee State UniversityMurfreesboroUSA
  2. 2.Berry CollegeMount BerryUSA

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