Setting price or quantity: Depends on what the seller is more uncertain about

نویسندگان

  • V. Padmanabhan
  • Ilia Tsetlin
  • Timothy Van Zandt
چکیده

We consider a seller with uncertain demand for its product. If the demand curve were certain, then setting price and setting quantity would be equivalent ways to frame the seller’s problem of choosing a profit-maximizing point on its demand curve. With uncertain demand, these become distinct sales mechanisms. We distinguish between uncertainty about the market size and uncertainty about the consumers’ valuations. Our main results are that (i) for a given marginal cost, an increase in uncertainty about valuations favors setting quantity whereas an increase in uncertainty about market size favors setting price; (ii) keeping demand uncertainty fixed, there is a nonmonotonic relationship between marginal costs and the optimal selling mechanism (setting price or quantity); and (iii) in a bilateral monopoly channel setting, coordination occurs except for a conflict zone in which the retailer’s choice of a selling mechanism deviates from the coordinated channel selling mechanism.

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

منابع مشابه

Advance Demand Information, Price Discrimination, and Preorder Strategies

T paper studies the preorder strategy that a seller may use to sell a perishable product in an uncertain market with heterogeneous consumers. By accepting preorders, the seller is able to obtain advance demand information for inventory planning and price discriminate the consumers. Given the preorder option, the consumers react strategically by optimizing the timing of purchase. We find that ac...

متن کامل

Price Discrimination in E-Commerce? An Examination of Dynamic Pricing in Name-Your-Own Price Markets

The enhanced abilities of online retailers to learn about their customers’ shopping behavior have increased fears of dynamic pricing, a practice in which a seller sets prices based on the estimated buyer’s willingness-to-pay. However, among online retailers, a deviation from a one-price-for-all policy is the exception. When price discrimination is observed, it is often in the context of custome...

متن کامل

A Model of Reference-Dependent Preferences

We develop a model that fleshes out, extends, and modifies existing models of referencedependent preferences and loss aversion, with the goal of making the theory more broadly applicable. Our model 1) allows for stochastic reference points; 2) accommodates a realistic form of flexibility in the “psychological dimensions” relevant for evaluating gains and losses; 3) combines the reference-depend...

متن کامل

Learning about the arrival of sales

We analyse optimal stopping when the economic environment changes because of learning. A primary application is optimal selling of an asset when demand is uncertain. The seller learns about the arrival rate of buyers. As time passes without a sale, the seller becomes more pessimistic about the arrival rate. When the arrival of buyers is not observed, the rate at which the seller revises her bel...

متن کامل

Price Setting in Iran: Some Stylized Facts from CPI Micro Data

Understanding the degree of price stickiness and the nature of price setting is necessary for analyzing the effects of monetary policy on economy. To the best of our knowledge, no comprehensive study has examined the degree of price stickiness in Iran yet. For this reason, we examine the basic features of retail price setting behavior using a large data set containing the micro data underly...

متن کامل

ذخیره در منابع من


  با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

عنوان ژورنال:

دوره   شماره 

صفحات  -

تاریخ انتشار 2009