We consider the problem of pricing a single object when the seller has only minimal information about the true valuation of the buyer. Specifically, the seller only knows the support of the possible valuations and has no further distributional information. The seller is solving this choice problem under uncertainty by minimizing her regret. The pricing policy hedges against uncertainty by randomizing over a range of prices. The support of the pricing policy is bounded away from zero. Buyers with low valuations cannot generate substantial regret and are priced out of the market. We generalize the pricing policy without priors to encompass many buyers and many qualities.
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Length: 10 pages Date of creation: Sep 2007 Date of revision: Publication status: Published in Journal of the European Economic Association (April-May 2008), 6(2-3): 560-569 Handle: RePEc:cwl:cwldpp:1625
Find related papers by JEL classification: C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
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