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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...
Persistent link: https://www.econbiz.de/10014070716
This study develops a general equilibrium model within which self revelation of ability - that is not accompanied by any signaling - is compatible with arrival at rational expectations equilibriums (REE). In the model, economic agents either are 'confident', 'overconfident', or 'under-confident'...
Persistent link: https://www.econbiz.de/10012833312
the Law of Large Numbers that is the source of market efficiency, but rather the 'structure of innovation' that subsists …
Persistent link: https://www.econbiz.de/10014348681
sufficiently high, license without entry strategy is optimum; if the low quality good’s quality is low, both of entry without … license strategy and license without entry strategy are optimum; when cost functions are quadratic, if the high quality good …’s quality is high, license without entry strategy is optimum; if the high quality good’s quality is low, entry with license …
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We study a simple model in which two vertically differentiated firms compete in prices and mass advertising on an initially uninformed market. Consumers differ in their preference for quality. There is an upper bound on prices since consumers cannot spend more on the good than a fixed amount...
Persistent link: https://www.econbiz.de/10014636238
Dynamic consistency leads to Bayesian updating under expected utility. We ask what it implies for the updating of more general preferences. In this paper, we characterize dynamically consistent update rules for preference models satisfying ambiguity aversion. This characterization extends to...
Persistent link: https://www.econbiz.de/10003782136
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