Optimal Pricing against a simple learning rule

Studienarbeit aus dem Jahr 2008 im Fachbereich VWL - Wettbewerbstheorie Wettbewerbspolitik Note: 20 Ruprecht-Karls-Universität Heidelberg Veranstaltung: Seminar: Behavioral Industrial Organization Sprache: Deutsch Abstract: Research conducted and published by sociologists psychologists aswell as experimental microeconomists has repeatedly highlighted that the common assumption of rational individuals in most of the existing literature of game theory is only a rough approximation to reality at best if not doubtful. With full rationality being a cornerstone the discipline has found itself in a dilemma situation. As early as 1955 Simon had consequently created the term bounded rationality and called for modified model assumptions. However his call has been largely unheard until 1996. Ernst-Ludwig von Thadden's paper Optimal pricingagainst a simple learning rule was one step on the way for more research focussing on the agents' lack of full rationality.This paper intends to provide firstly a short summary of the development of game theory research with a clear focus on bounded rationality. Secondly it presents the core assumptions and key take-aways of Ernst-Ludwig von Thadden's paper Optimal Pricing against a simple learning rule.Ernst-Ludwig von Thadden prime assumption is a non-strategicstrategic buyer in other words a buyer which updates his beliefs according to a simple learning rule. This non-strategic behaviour reflects Simon's call to assume a bounded rationality when modelling the agents' behaviour. Thadden's research shows - derived using a repeated buyer-seller relationship under asymmetric information - that the strategically acting seller can not benefit from this situation in terms of extract a supernormal price. On average the seller extracts only the buyer's mean utility u.