The ignorant monopolist redux

Roger Koenker ()
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Roger Koenker: Institute for Fiscal Studies and UCL

No CWP57/19, CeMMAP working papers from Centre for Microdata Methods and Practice, Institute for Fiscal Studies

Abstract: The classical problem of the monopolist faced with an unknown demand curve is considered in a simple stochastic setting. Sequential pricing strategies designed to maximize discounted pro?ts are shown to converge su?ciently rapidly that they leave the monopolist ignorant about all but the most local features of demand. The failure of the monopolist to “learn” his demand curve would seem to call into question some standard assumptions about agents’ grasp of their economic environment.

Date: 2019-10-30
New Economics Papers: this item is included in nep-com and nep-ind
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