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Personalized Prices and Uncertainty in Monopsony

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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. This price is lower than the classical monopsony price if the demand function is concave, and higher if the demand is convex. 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.

Suggested Citation

  • Roberto Burguet & Jozsef Sakovics, 2019. "Personalized Prices and Uncertainty in Monopsony," Edinburgh School of Economics Discussion Paper Series 290, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:290
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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