Paper: Invest in Information or Wing It? A Model of Dynamic Pricing with Seller Learning | HBS Working Knowledge
EXECUTIVE SUMMARY — Dealers who need to price idiosyncratic products–like houses, artwork, and used cars–often struggle with a lack of information about the demand for their specific items. Analyzing sales data from the used-car retail market, the authors of this paper develop a model of dynamic pricing for idiosyncratic products, showing that seller learning has an impact on pricing dynamics through a rich set of mechanisms. Overall, findings suggest a potentially high return to taking a more serious information-based approach to pricing idiosyncratic products.
Read complete article here: