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Dynamic pricing of new experience goods

Dynamic pricing of new experience goods
Dynamic pricing of new experience goods
We develop a dynamic model of experience goods pricing with independent private valuations. We show that the optimal paths of sales and prices can be described in terms of a simple dichotomy. In a mass market, prices are declining over time. In a niche market, the optimal prices are initially low followed by higher prices that extract surplus from the buyers with a high willingness to pay. We consider extensions of the model to integrate elements of social rather than private learning and turnover among buyers
0022-3808
713-744
Bergemann, Dirk
436929ea-1d3f-48d5-bf4f-08ef4a2d74b4
Välimäki, Juuso
d9473b09-7596-44dd-ab49-6904c9585e69
Bergemann, Dirk
436929ea-1d3f-48d5-bf4f-08ef4a2d74b4
Välimäki, Juuso
d9473b09-7596-44dd-ab49-6904c9585e69

Bergemann, Dirk and Välimäki, Juuso (2006) Dynamic pricing of new experience goods. Journal of Political Economy, 114 (4), 713-744. (doi:10.1086/506923).

Record type: Article

Abstract

We develop a dynamic model of experience goods pricing with independent private valuations. We show that the optimal paths of sales and prices can be described in terms of a simple dichotomy. In a mass market, prices are declining over time. In a niche market, the optimal prices are initially low followed by higher prices that extract surplus from the buyers with a high willingness to pay. We consider extensions of the model to integrate elements of social rather than private learning and turnover among buyers

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Published date: August 2006

Identifiers

Local EPrints ID: 47652
URI: https://eprints.soton.ac.uk/id/eprint/47652
ISSN: 0022-3808
PURE UUID: 8fe6a2b3-bead-4726-ab1b-e320a3df0f14

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Date deposited: 07 Aug 2007
Last modified: 13 Mar 2019 20:59

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