Retail Pricing and Clearance Sales: The Multidimensional Case

In this paper I generalize Lazear's model (1986) of retail pricing to the case of a monopolist selling two goods to a potential buyer with unknown valuations. The optimal prices and profit levels are computed for different distributions of valuations using Monte-Carlo simulations. Preliminary results show that the decrease in profits of the suboptimal pure bundling strategy (where the firm has to set only 2 prices) in both periods is extremely small relative to the profits of the optimal mixed bundling strategy (where the firm has to set 6 prices).