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The ignorant monopolist redux

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  • Roger Koenker

    (Institute for Fiscal Studies and UCL)

Abstract

The classical problem of the monopolist faced with an unknown demand curve is considered in a simple stochastic setting. Sequential pricing strategies designed to maximize discounted pro?ts are shown to converge su?ciently rapidly that they leave the monopolist ignorant about all but the most local features of demand. The failure of the monopolist to “learn” his demand curve would seem to call into question some standard assumptions about agents’ grasp of their economic environment.

Suggested Citation

  • Roger Koenker, 2019. "The ignorant monopolist redux," CeMMAP working papers CWP57/19, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:57/19
    as

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    File URL: https://www.ifs.org.uk/uploads/CW5719-The-ignorant-monopolist-redux.pdf
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    References listed on IDEAS

    as
    1. Sanford J. Grossman & Richard E. Kihlstrom & Leonard J. Mirman, 1977. "A Bayesian Approach to the Production of Information and Learning By Doing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 533-547.
    2. Nyarko, Yaw, 1991. "On the convergence of Bayesian posterior processes in linear economic models Counting equations and unknowns," Journal of Economic Dynamics and Control, Elsevier, vol. 15(4), pages 687-713, October.
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