Analyzing the NonLinear Pricing Strategy of Cibo using an Adverse Selection Game Theory Model

Dickson  A. Lim,

Analyzing the NonLinear Pricing Strategy of Cibo using an Adverse Selection Game Theory Model

Abstract:

With the inability of Cibo to correctly identify their patrons of which segment or type they are, a nonlinear pricing scheme was developed by the restaurant in the form the La Familia option. The La Familia option is a price discrimination strategy that attempts to extract surplus from either segment or type; but due to adverse selection, the product offering exhibits distortion to one of the segment or type.