Ontology highlight
ABSTRACT:
SUBMITTER: Radner R
PROVIDER: S-EPMC3890883 | biostudies-other | 2014 Jan
REPOSITORIES: biostudies-other
Radner Roy R Radunskaya Ami A Sundararajan Arun A
Proceedings of the National Academy of Sciences of the United States of America 20131223 1
We present a model of dynamic monopoly pricing for a good that displays network effects. In contrast with the standard notion of a rational-expectations equilibrium, we model consumers as boundedly rational and unable either to pay immediate attention to each price change or to make accurate forecasts of the adoption of the network good. Our analysis shows that the seller's optimal price trajectory has the following structure: The price is low when the user base is below a target level, is high ...[more]