Can forgetful sellers be better off? Impact of information in an ultimatum price-setting game with learning
AbstractThis paper introduces learning dynamics into a posted-offer pricing game, in which sellers observe past-period transactions before announcing a take-it or leave-it price, and buyers either accept or reject the announced price. We consider the impact that seller access to information regarding past transaction has on the long-term prices, and show that when sellers have imperfect information about the past, the long-term average sale price may be higher than when sellers perfectly observe the entire history of the game. It follows that limiting seller information can improve their long-term average welfare, and total long- term average sales revenue. This has interesting implications regarding firm incentives to provide information to their managers and sales agents.
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Bibliographic InfoPaper provided by EconWPA in its series Game Theory and Information with number 0510007.
Length: 41 pages
Date of creation: 18 Oct 2005
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learning; posted price games; limited memory; management incentives;
Find related papers by JEL classification:
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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