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Dynamic pricing of new experience goods

By Dirk Bergemann and Juuso Välimäki

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 buyer

Topics: HB
Year: 2006
OAI identifier: oai:eprints.soton.ac.uk:47652
Provided by: e-Prints Soton
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  • http://dx.doi.org/10.1086/5069... (external link)
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