Properties are derived for the profit-maximizing price schedule in a market where the firm can observe the size of any given purchase, but cannot directly observe the number of purchases made by any given consumer. In such a market, A consumer may make multiple purchases to minimize the amount paid for a given quantity of the good. It is shown that when purchase numbers are unobservable the schedule may entail quantity premia and may be strikingly different from the schedule that obtains when the numbers of purchases are observable. In particular, some individuals may consume more under the profit-maximizing outcome than under the first-best outcome.

This paper presents an experimental study of a computerized “posted-offer” pricing mechanism that captures many of the basic institutional features of retail exchange in the U.S. Posted-offer market performance is evaluated relative to “double-auction” market performance using two supply and demand designs. Subject experience with the trading mechanism is explicitly considered as an experimental treatment variable. The market data suggest that prices tend to be higher and efficiency lower under posted-offer pricing relative to double auction. However, the institutional effect appears to interact with other design conditions. When feasible, the predictive power of competitive, Nash, and limit-price theoretic equilibria are empirically evaluated.