The Implications of Pricing on Social Learning

We study the implications of endogenous pricing for learning and welfare in the classic herding model . When prices are determined exogenously, it is known that learning occurs if and only if signals are unbounded. By contrast, we show that learning can occur when signals are bounded as long as non-conformism among consumers is scarce. More formally, learning happens if and only if signals exhibit the vanishing likelihood property introduced bellow. We discuss the implications of our results for potential market failure in the context of Schumpeterian growth with uncertainty over the value of innovations

Dynamic Pricing in the Presence of Social Learning and Strategic Consumers

When a product of uncertain quality is first introduced, consumers may choose to strategically delay their purchasing decisions in anticipation of the product reviews of their peers. This paper investigates how the presence of social learning affects the strategic interaction between a dynamic-pricing monopolist and a forward-looking consumer population, within a simple two-period model. Our analysis yields three main insights. First, we find that the presence of social learning has significant structural implications for optimal pricing policies: In the absence of social learning, decreasing price plans are always preferred by the firm; by contrast, in the presence of social learning we find that (i) if the firm commits to a price path ex ante (preannounced pricing), an increasing price plan is typically announced, whereas (ii) if the firm adjusts price dynamically (responsive pricing), prices are initially low and may either rise or decline over time. Second, we establish that under both preannounced and responsive pricing, even though the social learning process exacerbates strategic consumer behavior (i.e., increases strategic purchasing delays), its presence results in an increase in expected firm profit. Third, we illustrate that, contrary to results reported in existing literature on strategic consumer behavior, in settings where social learning is significantly influential, preannounced pricing policies are generally not beneficial for the firm

Optimal Pricing and Endogenous Herding

We consider a monopolist who sells identical objects of common but unknown value in a herding-prone environment. Buyers make their purchasing decisions sequentially, and rely on a private signal as well as We consider a monopolist who sells identical objects of common but previous buyers’ actions to infer the common value of the object. The model applies to a variety of cases, such as the introduction of a new product or the sale of licenses to use a patent. We characterize the monopolist’s optimal pricing strategy and its implications for the temporal pattern of prices and for herding. The analysis is performed under alternative assumptions about observability of prices. We find that when previous prices are observable, herding may but need not arise. In contrast, herding arises immediately when previous prices are unobservable and the seller’s equilibrium strategy is a pure Markov strategy. While the possibility of social learning is present in the first case, it is absent in the second. Finally, we examine the seller’s incentive to manipulate the buyers’ evaluation of the object when buyers are naive. Using secret discounts the seller successfully interferes with social learning, and herding occurs in finite time.herding, informational cascades, optimal pricing

Optimal Pricing and Endogenous Herding

We consider a monopolist who sells indetical objects of common but unknown value in a herding-prone environment. Buyers make their purchasing decisions sequentially, and rely on a private signal as well as previous buyers´actions to infer the common value of the object. The model applies to a variety of cases, such as the introduction of a new product or the sale of licenses to use a patent. We characterize the monopolist´s optimal pricing strategy and its implications for the temporal pattern of prices and for herding.The analysis is performed under alternative assumptions about observability of prices. We find that when previous prices are observable, herding may but need not arise. In contrast, herding arises immediately when previous prices are unobservable and the seller´s equilibrium strategy is a pure Markov strategy. While the possibility of social learning is present in the first case, it is absent in the second. Finally, we examine the seller´s to manipulate the buyers´evaluation of the object when buyers are naive. Using secret discounts the seller succsessfully interferes with social learning, and herding occurs in finite time.

Two Essays from the Laboratory: An Experiment in Two-Sided Markets and a Meta-Analysis of Dictator Games

The broad goal of this research is to understand the implications of various institutional environments on social welfare and equity through laboratory experiments. In the first chapter, I analyze pricing structures and market behavior in markets with two-sided platforms, and for my second chapter, I explore the determinants of giving behavior in dictator game experiments. Recent court battles between Amazon and publishing companies over the control of ebook sales prices prompted the research question for my first chapter about the welfare effects of different types of pricing schemes in two-sided markets, where the presence of indirect network effects plays a crucial role unlike in traditional, one-sided markets. I conduct a novel, two-sided market experiment with competing platforms, sellers, and buyers to compare two pricing schemes: (1) the agency pricing scheme and (2) the platform pricing scheme. Under the agency pricing scheme, sellers retain control of prices over their goods or services (e.g. Amazon Marketplace), whereas, under the platform pricing scheme, platforms have control over prices (e.g. Uber). I also allow subjects to chat with one another in another set of treatments and find that communication leads to collusive behavior but only in the Agency Pricing Treatment. My findings suggest that the platforms’ lack of perfect information on the sellers’ costs as well as the less accommodating learning environment for platforms under platform pricing leads to lower market efficiency under the Platform Pricing Treatment than the Agency Pricing Treatment. As a result, policymakers may want to consider the role that information asymmetry plays across the two pricing schemes in their regulations of two-sided markets. My second chapter, joint work with Dr. James Cox, Dr. Vjollca Sadiraj, and Sean Bokelmann, is a meta-study of dictator game experiments. Using metadata collected by Engel (2011) from 620 dictator games from 131 papers, we explore the determinants of giving behavior and test the theory of “moral reference points”—introduced by Cox et. al (2017)—to explain giving behavior. Cox et al. (2017) define the moral reference points as an observable feature of opportunity sets (in dictator games) that captures information on the players’ endowments and the dictator’s action space. We update Engel’s (2011) data with additional information on the initial endowments and the minimal expectation points (via maximum and minimum amounts that the dictators can give or take) in order to calculate the moral reference points for each treatment. Using this updated data, we re-estimate Engel’s (2011) regression and meta-regression analyses and compare results to those when we include the moral reference points as covariates. Our results support the moral monotonicity hypothesis, the main defining characteristic of Cox et al.’s (2017) theory of moral reference points. Our findings have implications for the literature on charitable giving and altruistic behavior

Mktg

A new approach to learning the principles of marketing, MKTG is the Asia–Pacific edition of a proven, innovative solution to enhance the students' learning experience. Concise, yet complete, coverage supported by a suite of online learning aids equips students with the tools required to successfully undertake an introductory marketing course. Paving a new way to both teaching and learning, MKTG is designed to truly connect with today's busy tech-savy student. Students have access to online interactive quizzing, videos, podcasts, flashcards, marketing plans, games and more. An accessible, easy-to-read text along with tear out review cards complete a package which helps students to learn important concepts faster

A resource-advantage perspective on pricing: shifting the focus from ends to means-end in pricing research?

This paper contributes to a long-lasting debate between practitioners who argue that academia is unable to understand what pricing is all about and academics who criticize practitioner pricing approaches for lacking rigor or rationality. The paper conceptualizes a resource-advantage (R-A) perspective on pricing by drawing on the R-A theory of competition. After a review of R-A theory, the paper integrates the price discretion concept and pricing as a spanning competence by introducing a separation between resources that create and resources that extract value, thereby expanding R-A theory to pricing. The perspective aims to shed light on how the process of competition helps organizations to learn/benefit from pricing capabilities. The research shifts the focus of pricing research from an equilibrium-based static view to a dynamic, disequilibrium-provoking pricing competence. In this way, it draws attention to what is perhaps most relevant to pricing in practice: the actual means necessary to determine price

The Design of Free-Market Economies in a Post-Neoclassical World

The ‘Washington Consensus’ supporting competitive frames and market solutions in economics and law was shown inadequate to address social problems in non-U.S. settings. So would diversity and dynamics suggest theories in need of adjustment to other realities such as culture, increasing returns and market power. Reform must account for an economics of falling cost, ecological limits and complementarity in our relations. Such shall open new applications for economics and law. In this paper a theory of planning horizons is introduced and then employed to raise some meaningful questions about the neoclassical view with respect to its substitution, decreasing returns and independence assumptions. Suppositions of complementarity, increasing returns and interdependence suggest that competition is inefficient by upholding a myopic culture resistant to change. Growth – though long believed to rise from markets and competitive values – may not derive from these sources. Instead, as civilizations advance, shifting from material wants to higher-order intangible output, they evolve from market tradeoffs (substitution and scarcity) into realms of common need (complementarity and abundance). If so, then neoclassical arguments shall no longer apply to any advanced information economy also restrained by its ecology. Indeed, this paper opens standard theory into a more general framework constructing ‘horizon effects’ into a case for cooperation – as more efficient than competition for all long-term problems of growth. The case is made that competition is keeping us stupid and immature, rewarding a myopic culture at the expense of learning and trust, therefore retarding economic growth instead of encouraging it as believed. The policy implications of horizonal theory are explored, with respect to regulatory aims and economic concerns. Such an approach emphasizes strict constraints against entry barriers, ecological harm, market power abuse and ethical lapses. Social cohesion – not competition – is sought as a means to extend horizons and thereby increase efficiency, equity and ecological health. The overriding importance of horizon effects for regulatory assessment dominates other orthodox standards in economics and law. In sum, much of the reason for the failure of the Washington Consensus stems from myopic concerns central to any horizonal view. Reframing economics along horizonal lines suggests some meaningful insight to how regulations should be designed to keep pace with this approach in economics and law