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Optimal Pricing in the Presence of Experience Effects

Abstract

In this paper we analyze the problem of optimal intertemporal pricing for a monopolist when current (and past) output affect future cost and/or demand conditions through experience in production and/or in consumption. Learning by doing, the experience curve, contagion, habit formation, bandwagon, and snob effects are all examples of terminologies used to describe such situations. We call these experience effects for convenience and explore profit-maximizing pricing behavior when such effects exis

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