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Dynamic monopoly pricing and herding

  • Subir Bose
  • Gerhard Orosel
  • Marco Ottaviani
  • Lise Vesterlund

This paper studies dynamic pricing by a monopolist selling to buyers who learn from each other’s purchases. The price posted in each period serves to extract rent from the current buyer, as well as to control the amount of information transmitted to future buyers. As information increases future rent extraction, the monopolist has an incentive to subsidize learning by charging a price that results in information revelation. Nonetheless in the long run, the monopolist generally induces herding by either selling to all buyers or exiting the market.

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File URL: http://hdl.handle.net/10.1111/j.1756-2171.2006.tb00063.x
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Article provided by RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 37 (2006)
Issue (Month): 4 (December)
Pages: 910-928

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Handle: RePEc:bla:randje:v:37:y:2006:i:4:p:910-928
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  1. Neeman, Zvika & Orosel, Gerhard O., 1999. "Herding and the Winner's Curse in Markets with Sequential Bids," Journal of Economic Theory, Elsevier, vol. 85(1), pages 91-121, March.
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