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Pricing without Priors

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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File URL: http://cowles.econ.yale.edu/P/cd/d16a/d1625.pdf
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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1625.

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Length: 10 pages
Date of creation: Sep 2007
Date of revision:
Publication status: Published in Journal of the European Economic Association (April-May 2008), 6(2-3): 560-569
Handle: RePEc:cwl:cwldpp:1625
Note: CFP 1224.
Contact details of provider: Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/

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Order Information: Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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  1. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  2. Dirk Bergemann & Karl Schlag, 2005. "Robust Monopoly Pricing," Cowles Foundation Discussion Papers 1527RR, Cowles Foundation for Research in Economics, Yale University, revised Sep 2008.
  3. Neeman, Zvika, 2003. "The effectiveness of English auctions," Games and Economic Behavior, Elsevier, vol. 43(2), pages 214-238, May.
  4. Stoye, Jörg, 2011. "Axioms for minimax regret choice correspondences," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2226-2251.
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