How should a monopolist price when selling to buyers who learn from each other’s decisions? Focusing on the case in which the common value of the good is binary and each buyer receives a binary private signal about that value, we completely answer this question for all values of the production cost, the precision of the buyers’ signals, and the seller’s discount factor. Unexpectedly, we find that there is a region of parameters for which learning stops at intermediate and at extreme beliefs, but not at beliefs that lie between those intermediate and extreme beliefs.

Monopoly pricing in the binary herding model

Ottaviani, Marco;
2008

Abstract

How should a monopolist price when selling to buyers who learn from each other’s decisions? Focusing on the case in which the common value of the good is binary and each buyer receives a binary private signal about that value, we completely answer this question for all values of the production cost, the precision of the buyers’ signals, and the seller’s discount factor. Unexpectedly, we find that there is a region of parameters for which learning stops at intermediate and at extreme beliefs, but not at beliefs that lie between those intermediate and extreme beliefs.
2008
Bose, Subir; Orosel, Gerhard; Ottaviani, Marco; Vesterlund, Lise
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/3734858
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