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Intertemporal pricing in laboratory posted offer markets with differential information

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Author Info

  • Aldo Rustichini

    (Department of Economics, Boston University, Boston, MA 02215, USA)

  • Anne P. Villamil

    (Department of Economics, University of Illinois, Champaign, IL 61820, USA)

Abstract

This paper analyzes intertemporal seller pricing and buyer purchasing behavior in a laboratory retail market with differential information. A seller posts one price each period that a buyer either accepts or rejects. Trade occurs over a sequence of "market periods" with a random termination date. The buyer and seller are differentially informed: The seller's cost of producing a unit of a fictitious good is known and constant in all periods, but the buyer's value for the good (demand) is a random variable governed by a Markov Process whose structure is common knowledge. At the beginning of each period the unit's value is determined by "nature" and is privately revealed only to the buyer. The market termination rule is a binary random variable. We conduct 32 laboratory experiments designed to study intertemporal pricing by human subjects in the Posted Offer Institution when demand follows a stochastic process. There are four series of experiments: 8 with simulated buyers, 8 with inexperienced subjects, 8 with once experienced subjects, and 8 with twice experienced subjects.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 16 (2000)
Issue (Month): 3 ()
Pages: 613-637

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Handle: RePEc:spr:joecth:v:16:y:2000:i:3:p:613-637

Note: Received: October 1, 1998; revised version: August 30, 1999
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Related research

Keywords: Intertemporal pricing; Differential information.;

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Cited by:
  1. Gabriele Camera & Marco Casari, 2009. "Cooperation among Strangers under the Shadow of the Future," American Economic Review, American Economic Association, vol. 99(3), pages 979-1005, June.
  2. Winston Koh, 2006. "The micro-foundations of intertemporal price discrimination," Economic Theory, Springer, vol. 27(2), pages 393-410, January.

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