EVOLUTIONARY CONSUMERS IMPLY MONOPOLIES EXIT

Patrick Hummel and Randolph McAfee

International Economic Review, 2018, vol. 59, issue 4, 1733-1746

Abstract: We address the question of how a monopolist should price when facing evolutionary consumers who gradually move in the direction of following their optimal strategy but may make temporary suboptimal choices. We show that under a broad generalization of the most commonly used model of evolution, the monopolist will set a path of prices such that all consumers eventually stop purchasing the monopolist's product.

Date: 2018
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