Optimal Pricing Strategy for New Products
Robinson and Lakhani (1975) initiated a long research stream in marketing when they used the Bass model (1969) to develop optimal pricing path for a new product. A careful analysis of the extant literature reveals that the research predominantly suggests that the optimal price path should be largely based on the sales growth pattern. However, in the real world we rarely find new products that have such pricing pattern. We observe either a monotonically declining pricing pattern or an increase-decrease pricing pattern that does not seem close to the sales path. In this paper, we use a variation of the generalized Bass model (called GBM) developed by Bass et al. (1994) that yields optimal pricing policies that are consistent with empirical data.
Volume (Year): 45 (1999)
Issue (Month): 12 (December)
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- Bass, Frank M, 1980. "The Relationship between Diffusion Rates, Experience Curves, and Demand Elasticities for Consumer Durable Technological Innovations," The Journal of Business, University of Chicago Press, vol. 53(3), pages 51-67, July.
- Frank M. Bass, 1969. "A New Product Growth for Model Consumer Durables," Management Science, INFORMS, vol. 15(5), pages 215-227, January.
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- Shlomo Kalish, 1985. "A New Product Adoption Model with Price, Advertising, and Uncertainty," Management Science, INFORMS, vol. 31(12), pages 1569-1585, December.
- Shlomo Kalish, 1983. "Monopolist Pricing with Dynamic Demand and Production Cost," Marketing Science, INFORMS, vol. 2(2), pages 135-159.
- Frank M. Bass & Alain V. Bultez, 1982. "Technical Note—A Note on Optimal Strategic Pricing of Technological Innovations," Marketing Science, INFORMS, vol. 1(4), pages 371-378.
- Dan Horsky, 1990. "A Diffusion Model Incorporating Product Benefits, Price, Income and Information," Marketing Science, INFORMS, vol. 9(4), pages 342-365.
- Jain, Dipak C & Rao, Ram C, 1990. "Effect of Price on the Demand for Durables: Modeling, Estimation, and Findings," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 163-170, April.
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