We consider a nonlinear pricing problem faced by a dominant firm which competes with a capacity-constrained minor firm for a downstream buyer who may purchase the product from the firms under complete information. Specifically, we analyze a three-stage game in which the dominant firm offers a...

We study a mechanism designer’s trade-off between the complexity level and optimality level of a mechanism. While our techniques apply to a much larger class of mechanism design problems, we focus on the quality differentiation model of Mussa and Rosen (1978), restricting the monopolist to...