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Pricing Strategy Under Monopoly Conditions: An Experiment for the Classroom

Published online by Cambridge University Press:  28 April 2015

Robert G. Nelson  and
Richard O. Beil Jr.
Robert G. Nelson
Affiliation:
Department of Agricultural Economics and Rural Sociology, and the Department of Economics, respectively, at Auburn University, Alabama
Richard O. Beil Jr.
Affiliation:
Department of Agricultural Economics and Rural Sociology, and the Department of Economics, respectively, at Auburn University, Alabama
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Abstract

This classroom experiment allows students to explore pricing strategies available to the monopolist. Students are given full information about their costs but know nothing about demand except that it is simulated by the instructor. They submit their price-asked and quantity-offered records on one day and receive the quantity-sold response from the instructor on the next day, continuing this routine until they discover the profit-maximizing price and quantity. One of the objectives is to demonstrate that search strategies based on economic principles (MC=MR) can be more efficient than trial-and-error.

Keywords

experimental economicsgamesmonopolistteaching
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 26 , Issue 1 , July 1994 , pp. 287 - 298
Copyright
Copyright © Southern Agricultural Economics Association 1994

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