Jonathan Libgober, University of Southern California. "Informational Robustness in Intertemporal Pricing"
ESOP seminar. Jonathan Libgober is an Assistant Professor at the University of Southern California, he will present the paper: "Informational Robustness in Intertemporal Pricing". Co-authored by Xiaosheng Mu
We introduce a robust approach to study dynamic monopoly pricing of a durable good in the face of buyer learning. A buyer receives information about her willingness-to-pay for the seller’s product over time, and decides when to make a one-time purchase. The seller does not know how the buyer learns, but commits to a pricing strategy to maximize profits against the worst-case information arrival process. We show that a constant price path delivers the robustly optimal profit, with profit and price both lower than under known values. Thus, under the robust objective, intertemporal incentives do not arise at the optimum, despite the possibility for information arrival to influence the timing of purchases. We delineate whether constant prices remain optimal (or not) when the seller seeks robustness against a subset of information arrival processes. As part of the analysis, we develop new techniques to study dynamic Bayesian persuasion.