Learning Buyers' Valuation Distribution in Posted-Price Selling

Abstract

A dynamic pricing model is studied where a seller of an asset faces a sequence of potential buyers whose valuation distribution is unknown to the seller. The seller learns more about the distribution in the selling process and becomes less optimistic as time passes by. We characterize the optimal posted prices which incorporate the newly updated belief every period and derive conditions under which these prices are declining over time. A counter-example is provided to demonstrate that there can be situations where the optimal prices actually increase over time.Price determination, Posted-price selling, Learning