Nonlinear Pricing: Capturing Consumer Surplus

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.