Learning Behaviors in Trading Luxury Good
Date Issued
2009
Date
2009
Author(s)
Wei, Shi-Jie
Abstract
How does a seller manipulate the price of luxury goods in order to maximize his profit, given that the demand for luxury goods may fluctuate with regard to the selling price during each trading period? We discuss this question by considering the seller as a monopolist who produces exclusively one type of the luxury goods which are identical. During each trading period, a buyer with no pre-knowledge of the good comes to buy one. The seller then considers his dress and/or appearance to determine the price he wants to sell. After the trade, the seller may update his belief in the buyers who could accept higher price. By an appropriate learning mechanism we characterize the conditions under which the seller would sometimes induce an informational cascade such that he sells at the same price regardless of the signal and the conditions under which the seller would increase the price gradually whenever he observes a "high" signal till the price reaches its long-run equilibrium.
Subjects
Luxury good
Learning
Monopolist
Pricing
long-run equilibrium
Type
thesis
File(s)![Thumbnail Image]()
Loading...
Name
ntu-98-R94221015-1.pdf
Size
23.53 KB
Format
Adobe PDF
Checksum
(MD5):dbe13293513d0aaf5644ae25c7e0f898