Topics in Price Theory and Game Theory

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This work includes several topics in price theory. The first major topic develops analyses of multiproduct pricing and related problems of taxation, regulation, and contracting. This includes several tasks: elaboration of some basic results to take advantage of implicit bundling, extensions of an alternative formulation that relies only on observable demand data, development of computational methods for both formulations, and exposition of applications to practical aspects of multiproduct pricing in industries such as communications and power. Also, these methods will be used to elaborate a more general theory of optimal mechanism design that allows risk aversion, correlated information, and other realistic features. The second major topic develops the theory of the option value component of the prices of flexible substitutes for irreversible durable investments, including the characterization of optimal investment policies in such contexts. The main applications are to prices of sulfur dioxide emission allowances for electric utilities, and to investments to reduce or alleviate the effects of global warming. Additional topics include studies applying theories of bargaining to labor negotiations and to pre-trial negotiations between litigants, and development of computational methods for computing stable equilibria. This study will have important contributions in many fields. For example, the solution to the class of pricing problems may be helpful in such matters as space shuttle cargo allocation and allocation of computer time among several users. The option value study would be relevant for policy issues concerning the abatement of global warming by limiting carbon emissions.