Optimal pricing and quality choice of a monopolist under Knightian uncertainty

Takao Asano, Akihisa Shibata

Research output: Contribution to journalArticlepeer-review

7 Citations (Scopus)


This paper analyzes a simple vertical product differentiation model with demand uncertainty and derives a risk neutral monopolist's optimal market entry timing, her optimal pricing and optimal quality choice by incorporating Knightian uncertainty, irreversibility, and flexibility in quality-enhancing investment into a continuous-time stochastic model. It is shown that an increase in Knightian uncertainty induces decreases in the optimal price, the optimal quality, and the value of undertaking the quality-enhancing investment by the monopolist. The social optimal entry timing, pricing and quality are also analyzed.

Original languageEnglish
Pages (from-to)746-754
Number of pages9
JournalInternational Journal of Industrial Organization
Issue number6
Publication statusPublished - Nov 2011


  • Knightian uncertainty
  • Monopoly pricing
  • Quality choice

ASJC Scopus subject areas

  • Industrial relations
  • Aerospace Engineering
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management
  • Industrial and Manufacturing Engineering


Dive into the research topics of 'Optimal pricing and quality choice of a monopolist under Knightian uncertainty'. Together they form a unique fingerprint.

Cite this