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research articles : Learning buyers' valuation distribution in posted-price selling

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Author Info
Ruqu Wang () (Department of Economics, Queen's University, Kingston, Ontario, K7L 3N6, CANADA)
Yongmin Chen () (Department of Economics, University of Colorado at Boulder, Campus Box 256, Boulder, CO 80309, USA)

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Abstract

A dynamic pricing model is studied where a seller of an asset faces a sequence of potential buyers whose valuation distribution is unknown to the seller. The seller learns more about the distribution in the selling process and becomes less optimistic as the object remains unsold. We characterize the optimal posted prices which incorporate updated beliefs every period, and derive a rather tight sufficient condition under which these prices decline over time. An example is provided where the optimal prices can actually increase over time if the condition is violated.

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Publisher Info
Article provided by Springer in its journal Economic Theory.

Volume (Year): 14 (1999)
Issue (Month): 2 ()
Pages: 417-428
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Handle: RePEc:spr:joecth:v:14:y:1999:i:2:p:417-428

Note: Received: May 12, 1998; revised version: July 7, 1998
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Related research
Keywords: Price determination; Posted-price selling; Learning.;

Find related papers by JEL classification:
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

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