Dynamic Monopoly Pricing and Herding

Subir Bose (), Gerhard O Orosel, Marco Ottaviani () and Lise Vesterlund ()

No 5003, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies dynamic pricing by a monopolist selling to buyers who learn from each other’s purchases. The price posted in each period serves to extract rent from the current buyer, as well as to control the amount of information transmitted to future buyers. As information increases future rent extraction, the monopolist has an incentive to subsidize learning by charging a price that results in information revelation. Nonetheless in the long run, the monopolist generally induces herding by either selling to all buyers or exiting the market.

Keywords: herd behaviour; informational cascade; monopoly; public information; social learning (search for similar items in EconPapers)
JEL-codes: D83 L12 L15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-ind
Date: Written
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