Learning about the arrival of sales |
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Authors: | Robin Mason,Juuso Vä limä ki |
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Affiliation: | a University of Exeter Business School, Streatham Court, Rennes Drive, Exeter EX4 4PU, UK b CEPR, UK c Aalto University School of Economics, P.O. Box 21210, FI-00076 Aalto, Finland |
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Abstract: | 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 beliefs is affected by the price she sets. Learning leads to a higher posted price by the seller. When the seller does observe the arrival of buyers, she sets an even higher price. |
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Keywords: | D42 D81 D82 |
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