In this section we present our model and analyze consumer and producer behavior when there is no value from learning. This allows us to present an hierarchy of complex price schedules and to separate their differing abilities to produce profits from the costs and benefits of learning. In Section 3 we introduce an opportunity to learn, and then study the interaction between learning and pricing choices.
In our model, a monopolist produces N items (articles) in each period. Consumers have identical a priori subjective distributions of beliefs over article values. The marginal cost of duplicating and delivering any item is zero. The offered price schedule is denoted by a function T(Q) specifying a payment T for a set Q of delivered articles. Consumers may not read all articles that are delivered (e.g., when they receive a subscription or bundle).