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Learning buyers' valuation distribution in posted-price selling

Author

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  • Chen, Yongmin
  • Wang, Ruqu

Abstract

A dynamic pricing model is studied where a seller of an asset faces a sequence of potential buyers whose valuation distribution is unknown to the seller. The seller learns more about the distribution in the selling process and becomes less optimistic as the object remains unsold. We characterize the optimal posted prices which incorporate updated beliefs every period, and derive a rather tight sufficient condition under which these prices decline over time. An example is provided where the optimal prices can actually increase over time if the condition is violated.
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Suggested Citation

  • Chen, Yongmin & Wang, Ruqu, 1997. "Learning buyers' valuation distribution in posted-price selling," Queen's Institute for Economic Research Discussion Papers 273387, Queen's University - Department of Economics.
    • Handle: RePEc:ags:queddp:273387
    DOI: 10.22004/ag.econ.273387
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    Cited by:

    1. Gershkov, Alex & Moldovanu, Benny, 2012. "Optimal search, learning and implementation," Journal of Economic Theory, Elsevier, vol. 147(3), pages 881-909.
    2. Walter Beckert, 2004. "Dynamic Monopolies with Stochastic Demand," Birkbeck Working Papers in Economics and Finance 0404, Birkbeck, Department of Economics, Mathematics & Statistics.
    3. H. Müge Yayla‐Küllü & Jennifer K. Ryan & Jayashankar M. Swaminathan, 2021. "Product Line Flexibility for Agile and Adaptable Operations," Production and Operations Management, Production and Operations Management Society, vol. 30(3), pages 725-737, March.
    4. Benny Moldovanu & Alex Gershkov, 2008. "The Trade-off Between Fast Learning and Dynamic Efficiency," 2008 Meeting Papers 348, Society for Economic Dynamics.

    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • 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

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