Monopolies exploit consumer bias with nonlinear pricing strategies.
Consumers often base their choices on average prices rather than marginal prices when faced with complex pricing. A monopolist's optimal pricing strategy in this scenario can lead to lower consumption for top consumers, efficient consumption for bottom consumers, and quantity premiums instead of discounts. This is because the bias in consumer behavior replaces information rents with curvature rents. Whether a monopolist prefers consumers with average-price bias depends on their preferences and costs.