Working Paper

The ignorant monopolist redux


Roger Koenker

Published Date

30 October 2019


Working Paper (CWP57/19)

The classical problem of the monopolist faced with an unknown demand curve is considered in a simple stochastic setting. Sequential pricing strategies designed to maximize discounted profits are shown to converge sufficiently rapidly that they leave the monopolist ignorant about all but the most local features of demand. The failure of the monopolist to “learn” his demand curve would seem to call into question some standard assumptions about agents’ grasp of their economic environment.