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Pricing under asymmetry and ambiguity

Author

Listed:
  • Dokka, Trivikram

    (Queens University Belfast)

  • SenGupta, Sonali

    (Queens University Belfast)

Abstract

Robust pricing models often suffer from being overly conservative. This is due to lack of asymmetry information within the set of possible valuation distributions. However, even when information on asymmetry is available incorporating it within pricing models makes the characterization of pricing policies very difficult. Our main results address this challenge by providing an explicit characterization of the worst-case prior under the extended information setting that includes semivariance as a measure of asymmetry on top of mean and variance. We illustrate the gain from having the asymmetry information captured via semivariance.

Suggested Citation

  • Dokka, Trivikram & SenGupta, Sonali, 2023. "Pricing under asymmetry and ambiguity," CRETA Online Discussion Paper Series 79, Centre for Research in Economic Theory and its Applications CRETA.
    • Handle: RePEc:wrk:wcreta:79
    as

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    File URL: https://warwick.ac.uk/fac/soc/economics/research/centres/creta/papers/manage/creta79_-_sonali_sengupta.pdf
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    References listed on IDEAS

    as
    1. Dirk Bergemann & Karl Schlag, 2012. "Robust Monopoly Pricing," World Scientific Book Chapters, in: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs, chapter 13, pages 417-441, World Scientific Publishing Co. Pte. Ltd..
    2. Peter Berck & Jairus M. Hihn, 1982. "Using the Semivariance to Estimate Safety-First Rules," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(2), pages 298-300.
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