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.
A technical note on the derivation of the Bayesian-Ramsey pricing rule
Transportation Research Part B: Methodological ; 20 , 1 ; 41-47
1984-11-17
7 pages
Article (Journal)
Electronic Resource
English
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