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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Paper provided by Queen's University, Department of Economics in its series Working Papers with number
953.
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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