ORIE Colloquium

John BirgeUniversity of Chicago
Dynamic learning in strategic pricing games

Tuesday, October 6, 2015 - 4:00pm
Rhodes 253

In monopoly pricing situations, firms optimally vary prices to learn demand. The variation must be sufficiently high to ensure complete asymptotic learning. In competitive situations, however, varying prices provides information to competitors and may reduce the value of learning. This talk will discuss how this effect can be strong enough to stop learning so that firms optimally reduce any variation in prices and choose not to learn demand. The result can be that the selling firms achieve a collaborative outcome instead of a competitive Nash equilibrium.