Robust Monopoly Pricing

Dirk Bergemann and Karl Schlag

Chapter 13 in Robust Mechanism Design:The Role of Private Information and Higher Order Beliefs, 2012, pp 417-441 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractWe 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: Mechanism Design; Game Theory; Auction Theory; Implementation; Private Information; First and Higher-Order Belief; BayesNash Equilibrium; Ex Post Equilibrium; Rationalizability; Vickrey-Clarke-Groves Mechanisms; Private Value; Interdependent Value; Common Value; Belief-Free Mechanisms (search for similar items in EconPapers)
JEL-codes: C70 D0 (search for similar items in EconPapers)
Date: 2012
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Related works:
Journal Article: Robust monopoly pricing (2011)
Working Paper: Robust Monopoly Pricing (2008)
Working Paper: Robust Monopoly Pricing (2007)
Working Paper: Robust Monopoly Pricing (2007)
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