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Robust monopoly pricing

Dirk Bergemann () and Karl Schlag ()

Journal of Economic Theory, 2011, vol. 146, issue 6, 2527-2543

Abstract: We consider a robust version of the classic problem of optimal monopoly pricing with incomplete information. In the robust version, the seller faces model uncertainty and only knows that the true demand distribution is in the neighborhood of a given model distribution. We characterize the pricing policies under two distinct decision criteria with multiple priors: (i) maximin utility and (ii) minimax regret. The equilibrium price under either criterion is lower then in the absence of uncertainty. The concern for robustness leads the seller to concede a larger information rent to all buyers with values below the optimal price without uncertainty.

Keywords: Monopoly; Robustness; Multiple priors; Maximin utility; Minimax regret; Robust mechanism design (search for similar items in EconPapers)
JEL-codes: C79 D82 (search for similar items in EconPapers)
Date: 2011
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Related works:
Working Paper: Robust Monopoly Pricing (2008) Downloads
Working Paper: Robust Monopoly Pricing (2007) Downloads
Working Paper: Robust Monopoly Pricing (2007) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:146:y:2011:i:6:p:2527-2543

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