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Intertemporal pricing in laboratory posted offer markets with differential information

Author

Listed:
  • Aldo Rustichini

    (Department of Economics, Boston University, Boston, MA 02215, USA)

  • Anne P. Villamil

    (Department of Economics, University of Illinois, Champaign, IL 61820, USA)

Abstract

This paper analyzes intertemporal seller pricing and buyer purchasing behavior in a laboratory retail market with differential information. A seller posts one price each period that a buyer either accepts or rejects. Trade occurs over a sequence of "market periods" with a random termination date. The buyer and seller are differentially informed: The seller's cost of producing a unit of a fictitious good is known and constant in all periods, but the buyer's value for the good (demand) is a random variable governed by a Markov Process whose structure is common knowledge. At the beginning of each period the unit's value is determined by "nature" and is privately revealed only to the buyer. The market termination rule is a binary random variable. We conduct 32 laboratory experiments designed to study intertemporal pricing by human subjects in the Posted Offer Institution when demand follows a stochastic process. There are four series of experiments: 8 with simulated buyers, 8 with inexperienced subjects, 8 with once experienced subjects, and 8 with twice experienced subjects.

Suggested Citation

  • Aldo Rustichini & Anne P. Villamil, 2000. "Intertemporal pricing in laboratory posted offer markets with differential information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(3), pages 613-637.
    • Handle: RePEc:spr:joecth:v:16:y:2000:i:3:p:613-637
    Note: Received: October 1, 1998; revised version: August 30, 1999
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    Citations

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    Cited by:

    1. Winston Koh, 2006. "The micro-foundations of intertemporal price discrimination," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(2), pages 393-410, January.
    2. Gabriele Camera & Marco Casari, 2009. "Cooperation among Strangers under the Shadow of the Future," American Economic Review, American Economic Association, vol. 99(3), pages 979-1005, June.

    More about this item

    Keywords

    Intertemporal pricing; Differential information.;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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