Pricing, learning, and strategic behavior in a single-sale model

Hector Chade, Virginia Vera De Serio

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

We analyze an infinite horizon model where a seller who owns an indivisible unit of a good for sale has incomplete information about the state of the world that determines not only the demand she faces but also her own valuation for the good. Over time, she randomly meets potential buyers who may have incentives to manipulate her learning process strategically. We show that i) the seller's incentives to post a high price and to experiment are not necessarily monotonic in the information conveyed by a buyer's rejection; and ii) as the discount factors tend to one, there are equilibria where the seller always ends up selling the good at an ex-post individually rational price.

Original languageEnglish (US)
Pages (from-to)333-353
Number of pages21
JournalEconomic Theory
Volume19
Issue number2
DOIs
StatePublished - Feb 2002

Keywords

  • Asymmetric information
  • Experimentation
  • Information revelation

ASJC Scopus subject areas

  • Economics and Econometrics

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