Dynamic Pricing of New Experience Goods
Dirk Bergemann Yale University
Juuso Helsinki School of Economics and University of Southampton

We develop a dynamic model of experience goods pricing with independent
private valuations. We show that the optimal paths of sales
and prices can be described in terms of a simple dichotomy. In a mass
market, prices are declining over time. In a niche market, the optimal
prices are initially low followed by higher prices that extract surplus
from the buyers with a high willingness to pay. We consider extensions
of the model to integrate elements of social rather than private learning
and turnover among buyers.