Economic Theory and Experimental Seminar - Keiichi Kawai (UNSW)
Room 605, Level 6, FBE Building, 111 Barry Street, CarltonMap
Title: Robust Pricing with Refunds
Abstract: We characterize a selling mechanism that is robust to the seller's uncertainty about the buyer's signal structure. We show that by offering a generous refund policy the seller can significantly reduce this type of uncertainty and regain market power. A simple mechanism that utilizes a generous refund policy and random discounts achieves the best guaranteed-profit among all possible mechanisms.