We explore the rational effect of price variation on sales and consumption in markets where consumers are uncertain about the future price of goods. We first derive an optimal ordering policy which expresses the amount a consumer should purchase and consume in a given period as a function of the...

The process by which individuals learn from feedback when making recurrent choices among ambiguous alternatives is explored. We describe an experiment in which subjects solve a variant of the classic armed-bandit problem of dynamic decision theory, set in the context of airline choice. Subjects...