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Learning about the arrival of sales

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  • Mason, Robin
  • Välimäki, Juuso

Abstract

We analyse optimal stopping when the economic environment changes because of learning. A primary application is optimal selling of an asset when demand is uncertain. The seller learns about the arrival rate of buyers. As time passes without a sale, the seller becomes more pessimistic about the arrival rate. When the arrival of buyers is not observed, the rate at which the seller revises her beliefs is affected by the price she sets. Learning leads to a higher posted price by the seller. When the seller does observe the arrival of buyers, she sets an even higher price.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 146 (2011)
Issue (Month): 4 (July)
Pages: 1699-1711

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Handle: RePEc:eee:jetheo:v:146:y:2011:i:4:p:1699-1711

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Optimal stopping Learning Uncertain demand;

References

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Cited by:
  1. Chong Huang & Fei Li, 2011. "Bargaining While Learning About New Arrivals, Second Version," PIER Working Paper Archive 13-033, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 21 May 2013.
  2. Jing-Yuan, Chiou, 2012. "In the shadow of giants," MPRA Paper 37033, University Library of Munich, Germany.

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