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Learning Buyers' Valuation Distribution in Posted-Price Selling

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Author Info
Yongmin Chen
Ruqu Wang

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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 time passes by. We characterize the optimal posted prices which incorporate the newly updated belief every period and derive conditions under which these prices are declining over time. A counter-example is provided to demonstrate that there can be situations where the optimal prices actually increase over time.

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File URL: http://www.econ.queensu.ca/working_papers/papers/qed_wp_953.pdf
File Format: application/pdf
File Function: First version 1997
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Publisher Info
Paper provided by Queen's University, Department of Economics in its series Working Papers with number 953.

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Date of creation: Sep 1997
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Handle: RePEc:qed:wpaper:953

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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

Cited by:
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  1. Walter Beckert, 2004. "Dynamic Monopolies with Stochastic Demand," Birkbeck Working Papers in Economics and Finance 0404, Birkbeck, Department of Economics, Mathematics & Statistics. [Downloadable!]
Statistics
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This page was last updated on 2009-11-25.

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