An empirical bayes adaptive price search ^∗

^∗The research was supported by a graant from the Natural Sciences and Engineering Research Council of Canada

Abstract

Wc cansider the problem of a consnmer desiring to buy an item at as low a price as possible, based on a finite sequence of price quotations obtained sequentially. In this paper, we assume that the price search is concerned with minimizing the cumulative costs from the search.We investigate the situation in which the buyer must update the price distribution in a Bayesian manner, but the prior distribution is not completely known to the buyer. Using the empirical Bayes approach, a stopping rule is constructed for the price search. The performance of the proposed procedure is studied

Keywords:

• Adaptive price search
• Bayesian updating
• Myopic policy
• empirical Bayes

^∗The research was supported by a graant from the Natural Sciences and Engineering Research Council of Canada

^∗The research was supported by a graant from the Natural Sciences and Engineering Research Council of Canada

Notes

^∗The research was supported by a graant from the Natural Sciences and Engineering Research Council of Canada