SSRN Author: Robert S. PindyckRobert S. Pindyck SSRN Content
http://www.ssrn.com/author=25841
http://www.ssrn.com/rss/en-usSun, 27 Nov 2016 03:12:53 GMTeditor@ssrn.com (Editor)Sun, 27 Nov 2016 03:12:53 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0REVISION: Pricing with Limited Knowledge of DemandHow should a firm price a new product for which little is known about demand? We propose a pricing rule that can be used if three conditions hold: the firm can estimate the maximum price it can charge and still expect to sell some units, the firm need not plan in advance the quantity it will sell, and marginal cost is known and constant. The rule is simple: Set price as though the demand curve were linear. We show that if the true demand curve is one of many commonly used demand functions, or even a more complex function, the firm can expect its profit to be close to what it would earn if it knew the true demand curve. We derive analytical performance bounds for a variety of demand functions, calculate expected profit performance for randomly generated demand curves, and evaluate the welfare implications of our pricing rule.
http://www.ssrn.com/abstract=2673810
http://www.ssrn.com/1544825.htmlFri, 18 Nov 2016 18:25:31 GMTREVISION: Pricing with Limited Knowledge of DemandHow should a firm price a new product for which little is known about demand? We propose a pricing rule that can be used if the firm can estimate (even roughly) the maximum price it can charge and still expect to sell some units, and the firm need not know in advance the quantity it will sell. The rule is simple: Set price as though the demand curve were linear. We show that if the true demand curve is one of many commonly used demand functions, or even a more complex function, and if marginal cost is known and constant, the firm can expect its profit to be close to what it would earn if it knew the true demand curve. We derive analytical performance bounds for a variety of demand functions, calculate expected profit performance for randomly generated demand curves, and evaluate the welfare implications of our pricing rule.
http://www.ssrn.com/abstract=2673810
http://www.ssrn.com/1468763.htmlTue, 09 Feb 2016 14:00:57 GMT