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Monopoly Experimentation

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Author Info
Amparo Urbano (Universitat de València)
Larry Samuelson (Penn State University)
Leonard J. Mirman (University of Virginia)

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Abstract

This paper considers a firm facing an uncertain demand curve. The firmcan experimentally adjust its output in order to gain information that willincrease expected future profits. We examine two basic questions. Under whatconditions is it worthwhile for the firm to experiment? How does the firmadjust its output away from the myopic optimism to exploit its ability toexperiment? Two necessary conditions are established for experimentation tooccur, involving requirements that experimentation be informative and thatinformation be valuable. Conditions are then established for experimentationto induce the firm to increase or decrease quantity. These results, whichcontain several previous analyses as special cases, provide an understanding of experimentation that will be useful in a number of applications.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1990-04.pdf
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File Function: Fisrt version / Primera version, 1990
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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 1990-04.

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Length: 40 pages
Date of creation: Jan 1990
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:1990-04

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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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