Menu Pricing and Learning
AbstractWe analyze the design of dynamic menus to sell experience goods. The quality of the product is initially unknown, and the total quantity sold in each period determines the amount of information in the market. We characterize the optimum menu as a function of consumers' beliefs, and the dynamic adjustments resulting from the diffusion of information. The firm faces a dynamic trade-off between gains from trade, information production, and information rents. It initially charges lower prices, sacrificing short-term revenue to increase sales. As more information is revealed, prices increase, and low-valuation buyers are excluded, even when the product's quality is high. (JEL D42, D82, D83, L12)
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Journal: Microeconomics.
Volume (Year): 3 (2011)
Issue (Month): 3 (August)
Find related papers by JEL classification:
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Godfrey Keller & Sven Rady, 1998.
"Optimal Experimentation in a Changing Environment,"
Game Theory and Information
- Dennis L. Gärtner, 2010.
"Monopolistic screening under learning by doing,"
RAND Journal of Economics,
RAND Corporation, vol. 41(3), pages 574-597.
- Gregory S. Crawford & Matthew Shum, 2005. "Uncertainty and Learning in Pharmaceutical Demand," Econometrica, Econometric Society, vol. 73(4), pages 1137-1173, 07.
- Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
- J. Miguel Villas-Boas, 2004. "Consumer Learning, Brand Loyalty, and Competition," Marketing Science, INFORMS, vol. 23(1), pages 134-145, December.
- J. Miguel Villas-Boas, 2006. "Dynamic Competition with Experience Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 37-66, 03.
- Günter J. Hitsch, 2006. "An Empirical Model of Optimal Dynamic Product Launch and Exit Under Demand Uncertainty," Marketing Science, INFORMS, vol. 25(1), pages 25-50, 01-02.
- Subir Bose & Gerhard Orosel & Marco Ottaviani & Lise Vesterlund, 2008. "Monopoly pricing in the binary herding model," Economic Theory, Springer, vol. 37(2), pages 203-241, November.
- David J. Braden & Shmuel S. Oren, 1994. "Nonlinear Pricing to Produce Information," Marketing Science, INFORMS, vol. 13(3), pages 310-326.
- M. Tolga Akçura & Füsun F. Gönül & Elina Petrova, 2004. "Consumer Learning and Brand Valuation: An Application on Over-the-Counter Drugs," Marketing Science, INFORMS, vol. 23(1), pages 156-169, April.
- Dutta, P.K., 1991. "What Do Discounted Optima Converge To? A Theory of Discount Rate Asymptotics in Economic Models," RCER Working Papers 264, University of Rochester - Center for Economic Research (RCER).
- Dutta, Prajit K., 1991. "What do discounted optima converge to?: A theory of discount rate asymptotics in economic models," Journal of Economic Theory, Elsevier, vol. 55(1), pages 64-94, October.
- Keller, Godfrey & Rady, Sven, 2012.
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
396, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.