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Dynamic Strategic Pricing and Speed of Diffusion

Author

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  • E. J. Dockner

    (University of Vienna)

  • G. E. Fruchter

    (Bar-Ilan University)

Abstract

Defining speed of diffusion as the amount of time it takes to get from one penetration level to a higher one, we introduce a dynamic model in which we study the link between pricing policy, speed of diffusion, and number of competitors in the market. Our analysis shows that, in the case of strategic (oligopolistic) competition, the speed of diffusion has an important influence on the optimal pricing policy. In particular, we find that higher speeds of diffusion create an incentive to strategically interacting firms to lower their prices.

Suggested Citation

  • E. J. Dockner & G. E. Fruchter, 2004. "Dynamic Strategic Pricing and Speed of Diffusion," Journal of Optimization Theory and Applications, Springer, vol. 123(2), pages 331-348, November.
    • Handle: RePEc:spr:joptap:v:123:y:2004:i:2:d:10.1007_s10957-004-5152-2
    DOI: 10.1007/s10957-004-5152-2
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    References listed on IDEAS

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    Cited by:

    1. Rubel, Olivier, 2013. "Stochastic competitive entries and dynamic pricing," European Journal of Operational Research, Elsevier, vol. 231(2), pages 381-392.
    2. G. E. Fruchter, 2008. "Dual-Role Based Pricing in a Dynamic and Competitive Environment," Journal of Optimization Theory and Applications, Springer, vol. 138(1), pages 27-44, July.
    3. Kumar, Subodha & Sethi, Suresh P., 2009. "Dynamic pricing and advertising for web content providers," European Journal of Operational Research, Elsevier, vol. 197(3), pages 924-944, September.
    4. Imoleayo Foyeke Obigbemi, 2010. "The Impact of Product Price Changes on the Turnover of Small and Medium Enterprises in Nigeria," BRAND. Broad Research in Accounting, Negotiation, and Distribution, EduSoft Publishing, vol. 1(1), pages 60-79, September.
    5. Marius F. Niculescu & Seungjin Whang, 2012. "Research Note ---Codiffusion of Wireless Voice and Data Services: An Empirical Analysis of the Japanese Mobile Telecommunications Market," Information Systems Research, INFORMS, vol. 23(1), pages 260-279, March.
    6. Steffen Jørgensen & Georges Zaccour, 2007. "Developments in differential game theory and numerical methods: economic and management applications," Computational Management Science, Springer, vol. 4(2), pages 159-181, April.

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