On the Optimal Pricing Policy of a Monopolist

The paper presents a simple explanation of price dispersion by a monopolist assuming only that consumers arrive in a random order and are served on a first-come-first-served basis. A firm can sometimes increase its profits by charging two different prices for the same good and rationing sales at the lower price. However, it is never necessary to charge more than two prices, and a single price is sufficient as long as either the marginal revenue curve is everywhere downward sloping or the marginal cost of production is constant.