Pricing of a new product with consumer learning

Abstract

Sometimes firms sell their products only for a limited time. This phenomenon can be interpreted as the firms' strategy to increase their profits by prohibiting consumers from learning their personal values of the product as time passes. This explanation can also be used to explain the firms' strategy to set low prices on their new products for only a limited time.

Keywords:

• Deadline of purchase
• consumer learning
• increasing price

Acknowledgements

The author wishes to thank Drew Fudenberg, Tomas Sjöström, Michael Whinston, Eric Maskin and two anonymous referees for their encouragement and comments, and gratefully acknowledge the financial aid from Yonsei University.

Notes

We will ignore the knife edge case equilibrium where

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