Monopoly pricing of congestible resources with incomplete information

Abstract

This paper discusses monopoly pricing in a market with congestion-type negative externalities. Two broad classes of situations are considered: communications network congestion for the case of pro?t maximization and road congestion for the case of welfare maximization. We allow the firm to screen consumers with different preferences using a nonlinear tariff, which has been largely neglected in the previous literature. It turns out that the level of overall congestion in the market is too low due to incomplete information for all types of consumers. Also, it is shown that the production technology of congestible resources has a crucial impact on the firm's cost-recoverability.