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Can forgetful sellers be better off? Impact of information in an ultimatum price-setting game with learning

Author

Listed:
  • Christopher Cotton

    (Cornell University)

Abstract

This paper introduces learning dynamics into a posted-offer pricing game, in which sellers observe past-period transactions before announcing a take-it or leave-it price, and buyers either accept or reject the announced price. We consider the impact that seller access to information regarding past transaction has on the long-term prices, and show that when sellers have imperfect information about the past, the long-term average sale price may be higher than when sellers perfectly observe the entire history of the game. It follows that limiting seller information can improve their long-term average welfare, and total long- term average sales revenue. This has interesting implications regarding firm incentives to provide information to their managers and sales agents.

Suggested Citation

  • Christopher Cotton, 2005. "Can forgetful sellers be better off? Impact of information in an ultimatum price-setting game with learning," Game Theory and Information 0510007, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpga:0510007
    Note: Type of Document - pdf; pages: 41
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/game/papers/0510/0510007.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    learning; posted price games; limited memory; management incentives;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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