EVOLUTIONARY CONSUMERS IMPLY MONOPOLIES EXIT

We address the question of how a monopolist should price when facing evolutionary consumers who gradually move in the direction of following their optimal strategy but may make temporary suboptimal choices. We show that under a broad generalization of the most commonly used model of evolution, the m...

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Bibliographic Details
Published in:International economic review (Philadelphia) 2018-11, Vol.59 (4), p.1733-1746
Main Authors: Hummel, Patrick, McAfee, R. Preston
Format: Article
Language:English
Subjects:
Consumer behavior
Economic theory
Evolution
Monopolies
Prices
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Summary:We address the question of how a monopolist should price when facing evolutionary consumers who gradually move in the direction of following their optimal strategy but may make temporary suboptimal choices. We show that under a broad generalization of the most commonly used model of evolution, the monopolist will set a path of prices such that all consumers eventually stop purchasing the monopolist's product.
ISSN:0020-6598
1468-2354
DOI:10.1111/iere.12318