Contingent Pricing to Reduce Price Risks

  title={Contingent Pricing to Reduce Price Risks},
  author={Eyal Biyalogorsky and Eitan Gerstner},
T price for a product may be set too low, causing the seller to leave money on the table, or too high, driving away potential buyers. Contingent pricing can be useful in mitigating these problems. In contingent pricing arrangements, price is contingent on whether the seller succeeds in obtaining a higher price within a specified period. We show that if the probability of obtaining the high price is not too high, sellers profit from using contingent pricing while economic efficiency increases… CONTINUE READING