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Informational Robustness in Intertemporal Pricing
[Political Disagreement and Information in Elections]

Author

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  • Jonathan Libgober
  • Xiaosheng Mu

Abstract

We introduce a robust approach to study dynamic monopoly pricing of a durable good in the face of buyer learning. A buyer receives information about her willingness-to-pay for the seller’s product over time, and decides when to make a one-time purchase. The seller does not know how the buyer learns but commits to a pricing strategy to maximize profits against the worst-case information arrival process. We show that a constant price path delivers the robustly optimal profit, with profit and price both lower than under known values. Thus, under the robust objective, intertemporal incentives do not arise at the optimum, despite the possibility for information arrival to influence the timing of purchases. We delineate whether constant prices remain optimal (or not) when the seller seeks robustness against a subset of information arrival processes. As part of the analysis, we develop new techniques to study dynamic Bayesian persuasion.

Suggested Citation

  • Jonathan Libgober & Xiaosheng Mu, 2021. "Informational Robustness in Intertemporal Pricing [Political Disagreement and Information in Elections]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(3), pages 1224-1252.
    • Handle: RePEc:oup:restud:v:88:y:2021:i:3:p:1224-1252.
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    File URL: http://hdl.handle.net/10.1093/restud/rdaa046
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    Citations

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    Cited by:

    1. Navin Kartik & Weijie Zhong, 2023. "Lemonade from Lemons: Information Design and Adverse Selection," Papers 2305.02994, arXiv.org.
    2. In-Koo Cho & Jonathan Libgober, 2022. "Learning Underspecified Models," Papers 2207.10140, arXiv.org.
    3. Rumen Kostadinov, 2023. "Worst-case Regret in Ambiguous Dynamic Games," Department of Economics Working Papers 2022-08, McMaster University.
    4. Jonathan Libgober & Xiaosheng Mu, 2022. "Coasian Dynamics under Informational Robustness," Papers 2202.04616, arXiv.org, revised Jan 2023.
    5. He, Wei & Li, Jiangtao, 2022. "Correlation-robust auction design," Journal of Economic Theory, Elsevier, vol. 200(C).
    6. Wanchang Zhang, 2022. "Robust Private Supply of a Public Good," Papers 2201.00923, arXiv.org, revised Jan 2022.

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