Dynamic Pricing of New Experience Goods

Dirk Bergemann and Juuso Välimäki
Authors registered in the RePEc Author Service: Juuso Välimäki

Journal of Political Economy, 2006, vol. 114, issue 4, 713-743

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.

Date: 2006
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Citations: View citations in EconPapers (73)

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