Abstract “Bayesian-Ramsey pricing” has been offered to correct for the undue sensitivity of the Baumol and Bradford formulation of Ramsey pricing to relatively small errors in the highly uncertain least-squares estimates of the relevant demand elasticities. This paper provides a derivation of the Ramsey pricing equation under uncertainty and of the required expectations for the case of linear demand curve under uncertainty characterized by a truncated normal posterior distribution. Such a posterior would arise from normal sample data in combination with an improper prior. These equations were used in a previously published paper in this journal to evaluate the Bayesian approach.


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    Title :

    A technical note on the derivation of the Bayesian-Ramsey pricing rule


    Contributors:


    Publication date :

    1984-11-17


    Size :

    7 pages




    Type of media :

    Article (Journal)


    Type of material :

    Electronic Resource


    Language :

    English



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