DYNAMIC MONOPOLY PRICING UNDER A POISSON-TYPE UNCERTAIN DEMAND

This article explores dynamic pricing strategies in the presence of uncertainty. Diffusion dynamics, experience curve effects, and a Poisson type of uncertainty in the demand are incorporated in a model using the framework of a stochastic control problem. The results indicate that the movement of the expected price depends on the relative strength of the contingent effects and the effects of the experience. If the direction of the former is opposite to the latter and is substantial enough to dominate it, the expected price path will show a pattern different from the one predicted by a deterministic model.