Summary
This paper analyzes intertemporal seller pricing and buyer purchasing behavior in a laboratory retail market with differential information. A seller posts one price each period that a buyer either accepts or rejects. Trade occurs over a sequence of “market periods” with a random termination date. The buyer and seller are differentially informed: The seller’s cost of producing a unit of a fictitious good is known and constant in all periods, but the buyer’s value for the good (demand) is a random variable govemed by a Markov Process whose structure is common knowledge. At the beginning of each period the unit' s value is determined by “nature” and is privately revealed only to the buyer. The market termination rule is a binary random variable. We conduct 32 laboratory experiments designed to study intertemporal pricing by human subjects in the Posted Offer Institution when demand follows a stochastic process. There are four series of experiments: 8 with simulated buyers, 8 with inexperienced subjects, 8 with once experienced subjects, and 8 with twice experienced subjects.
We gratefully acknowledge financial support from the University of Illinois.
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Rustichini, A., Villamil, A.P. (2001). Intertemporal pricing in laboratory posted offer markets with differential information. In: Cason, T., Noussair, C. (eds) Advances in Experimental Markets. Studies in Economic Theory, vol 15. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-56448-2_6
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DOI: https://doi.org/10.1007/978-3-642-56448-2_6
Publisher Name: Springer, Berlin, Heidelberg
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