PRICING STRATEGY UNDER MONOPOLY CONDITIONS: AN EXPERIMENT FOR THE CLASSROOM

Abstract

This classroom experiment allows students to explore pricing strategies available to the monopolist. Students are given full information about their costs but know nothing about demand except that it is simulated by the instructor. They submit their price-asked and quantity-offered records on one day and receive the quantity-sold response from the instructor on the next day, continuing this routine until they discover the profit-maximizing price and quantity. One of the objectives is to demonstrate that search strategies based on economic principles (MC=MR) can be more efficient than trial-and-error.Experimental economics, Games, Monopolistic, Teaching, Demand and Price Analysis, Teaching/Communication/Extension/Profession,