Pricing without Priors
Dirk Bergemann () and
Karl Schlag ()
No 1625, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University
We consider the problem of pricing a single object when the seller has only minimal information about the true valuation of the buyer. Specifically, the seller only knows the support of the possible valuations and has no further distributional information. The seller is solving this choice problem under uncertainty by minimizing her regret. The pricing policy hedges against uncertainty by randomizing over a range of prices. The support of the pricing policy is bounded away from zero. Buyers with low valuations cannot generate substantial regret and are priced out of the market. We generalize the pricing policy without priors to encompass many buyers and many qualities.
Keywords: Monopoly; Optimal pricing; Regret; Multiple priors; Distribution free (search for similar items in EconPapers)
JEL-codes: C79 D82 (search for similar items in EconPapers)
Pages: 10 pages
New Economics Papers: this item is included in nep-mic
Note: CFP 1224.
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Published in Journal of the European Economic Association (April-May 2008), 6(2-3): 560-569
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Chapter: Pricing Without Priors (2012)
Journal Article: Pricing without Priors (2008)
Working Paper: Pricing without Priors (2007)
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