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Monopoly Experimentation

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Author Info
Mirman, Leonard J
Samuelson, Larry
Urbano, Amparo

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Abstract

We examine a monopoly facing an uncertain demand and maximizing profits over a two-period horizon. Conditions are developed under which the firm will find it optimal to "experiment," or adjust initial prices or quantities away from their myopically optimal level in order to increase the informativeness of observed market outcomes and hence increase future profits. We establish conditions under which experimentation will lead a quantity-setting firm to increase or decrease quantity. Finally, we develop conditions under which experimenting firms will choose to be either price-setters or quantity-setters. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Publisher Info
Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 34 (1993)
Issue (Month): 3 (August)
Pages: 549-63
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Handle: RePEc:ier:iecrev:v:34:y:1993:i:3:p:549-63

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  1. Martin Ellison & Lucio Sarno & Jouko Vilmunen, 2004. "Monetary policy and learning in an open economy," Macroeconomics 0404022, EconWPA. [Downloadable!]
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  2. Christos Koulovatianos & Leonard J. Mirman & Marc Santugini, 2006. "Investment in a Monopoly with Bayesian Learning," Vienna Economics Papers 0603, University of Vienna, Department of Economics. [Downloadable!]
  3. Eric Borgne & Ben Lockwood, 2006. "Do Elections Always Motivate Incumbents? Learning vs. Re-Election Concerns," Public Choice, Springer, vol. 129(1), pages 41-60, October. [Downloadable!] (restricted)
  4. Oksana Loginova & Curtis Taylor, 2008. "Price experimentation with strategic buyers," Review of Economic Design, Springer, vol. 12(3), pages 165-187, September. [Downloadable!] (restricted)
  5. Arthur Fishman & Rafael Rob, . ""Experimentation and Competition''," CARESS Working Papres 97-12, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences. [Downloadable!]
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  6. Dirk Bergemann & Valimaki Juuso, 2001. "Entry and Vertical Differentiation," Cowles Foundation Discussion Papers 1302, Cowles Foundation, Yale University. [Downloadable!]
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  7. Christos Koulovatianos & Leonard J. Mirman & Marc Santugini, 2007. "Optimal Growth and Uncertainty: Learning," Cahiers de recherche 07-05, HEC Montréal, Institut d'économie appliquée, revised Feb 2008. [Downloadable!]
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  8. X. Henry Wang & Bill Yang, 2003. "Why Competition may Discourage Students from Learning? A Behavioral Economic Analysis," Education Economics, Taylor and Francis Journals, vol. 11(2), pages 117-128, August. [Downloadable!] (restricted)
  9. Andreas Blume & Paul Heidhues, 2003. "Private Monitoring in Auctions," CIG Working Papers SP II 2003-14, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
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  10. José J. Sempere Monerris & Amparo Urbano & María Dolores Alepuz, 1998. "- Duopoly Price Communication," Working Papers. Serie AD 1998-26, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  11. Arthur Fishman & Neil Gandal, 1993. "Experimentation and Learning with Network Effects," Industrial Organization 9309001, EconWPA. [Downloadable!]
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  12. Sa, Maria Antonieta Cunha e & Santos, Vasco, 2007. "Experimentation with Accumulation," FEUNL Working Paper Series wp503, Universidade Nova de Lisboa, Faculdade de Economia. [Downloadable!]
  13. le Borgne, E. & Lockwood, B., 2000. "Do Elections Always Motivate Incumbents?," The Warwick Economics Research Paper Series (TWERPS) 580, University of Warwick, Department of Economics. [Downloadable!]
  14. Dirk Bergemann & Juuso Valimaki, 1999. "Entry and Innovation in Vertically Differentiated Markets," Discussion Papers 1260, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  15. Michael T. Rauh & Giulio Seccia, 2005. "Anxiety and Performance: An Endogenous Learning-by-doing Model," Working Papers 2005-01, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
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  16. Kislaya Prasad, 2008. "Price asymptotics," Review of Economic Design, Springer, vol. 12(1), pages 21-32, April. [Downloadable!] (restricted)
  17. Eric Le Borgne & Ben Lockwood, 2003. "Do Elections Always Motivate Incumbents? Experimentation vs. Career Concerns," IMF Working Papers 03/57, International Monetary Fund. [Downloadable!]
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