Extensions of Amoroso-Robinson's Formula

Abstract

This paper deals with the problem of price-fixing from the standpoint of an individual firm in a heterogeneous market. The elementary Amoroso-Robinson formula is generalized within a deterministic as well as a probabilistic set-up. In the probabilistic case it is shown that the price-solution depends on the standard deviation of demand as a function of the price parameters. From the models considered it is, in particular, deduced that the optimum price is at a lower level than the corresponding deterministic price if the standard deviation is constant, but at a higher level if the coefficient of variation is constant.