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Pricing without Priors

  • Dirk Bergemann
  • Karl H Schlag

We consider the problem of pricing a single object when the seller has only minimal information about the true valuation of the buyer. Specifically, the seller only knows the support of the possible valuations and has no further distributional information. The seller is solving this choice problem under uncertainty by minimizing her regret. The pricing policy hedges against uncertainty by randomizing over a range of prices. The support of the pricing policy is bounded away from zero. Buyers with low valuations cannot generate substantial regret and are priced out of the market. We generalize the pricing policy without priors to encompass many buyers and many qualities.

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Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 122247000000001557.

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Date of creation: 17 Sep 2007
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Handle: RePEc:cla:levrem:122247000000001557
Contact details of provider: Web page: http://www.dklevine.com/

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  1. Neeman, Zvika, 2003. "The effectiveness of English auctions," Games and Economic Behavior, Elsevier, vol. 43(2), pages 214-238, May.
  2. Bergemann, Dirk & Schlag, Karl, 2011. "Robust monopoly pricing," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2527-2543.
  3. Stoye, Jörg, 2011. "Axioms for minimax regret choice correspondences," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2226-2251.
  4. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
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