Technical Note—A Note on Optimal Strategic Pricing of Technological Innovations
The experience curve phenomenon of falling marginal costs associated with accumulated output or production experience has given rise to dynamic pricing models. Optimal pricing policies will depend upon the nature of the dynamic demand and cost functions. In this note we shall show that the demand function employed by Bass (Bass, F. M. 1980. The relationship between diffusion rates, experience curves, and demand elasticities for consumer durable technological innovations. (July) S51–S67.) when taken in conjunction with the experience curve cost function leads to a multiperiod pricing strategy which is always less than the myopically optimal price. Further, we present a dynamic programming algorithm for the multiperiod strategy in which we have explored the effects on discounted profits of myopic pricing versus multiperiod pricing. The results of this comparison may, to some, be somewhat surprising and may have managerial significance.
Volume (Year): 1 (1982)
Issue (Month): 4 ()
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:1:y:1982:i:4:p:371-378. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.