Economics at your fingertips  

A dynamic monopoly with risk-averse consumers

María Martín-Rodríguez

Information Economics and Policy, 2018, vol. 43, issue C, 61-70

Abstract: I study the dynamically optimal pricing strategy of a forward-looking monopolist that introduces a novel product when facing a normalized population of risk-averse, non-strategic consumers. The product can be seen as an experience good in the first period. How well the product fits the consumers’ taste is learned only after experimentation, allowing for signaling in the second period. I find that the larger the degree of risk aversion, the higher the probability of observing an introductory price. Moreover, after the realization of a relatively poor fit between the product and the consumers’ taste, an introductory price is optimal from an ex-post perspective. Finally, a first-period price ceiling leads to a strictly larger level of welfare if and only if consumers are moderately risk averse.

Keywords: Asymmetric information; Risk aversion; Introductory price (search for similar items in EconPapers)
JEL-codes: L12 L15 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Information Economics and Policy is currently edited by D. Waterman

More articles in Information Economics and Policy from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2018-06-23
Handle: RePEc:eee:iepoli:v:43:y:2018:i:c:p:61-70