IDEAS home Printed from https://ideas.repec.org/a/taf/ijecbs/v17y2010i2p187-206.html
   My bibliography  Save this article

Optimal Pricing of Nondurables when Demand is Dynamic and Stochastic

Author

Listed:
  • Franz Wirl

Abstract

This paper derives optimal pricing strategies for nondurables if demand is sluggish and stochastic. The puzzling result is that moving from a static demand to a dynamic relation alters the marketing strategy dramatically if the equilibrium demand is convex (in price): the profit maximizing price policy is to switch between a low and a high price depending on current demand while a continuous price policy is optimal for concave demand relations. However, the formal existence of such a price switching policy is restricted to the anyway more realistic stochastic version of the model. The clear cut implications of the model provide also a criterion to test empirically the characteristics and the optimality of actual price strategies.

Suggested Citation

  • Franz Wirl, 2010. "Optimal Pricing of Nondurables when Demand is Dynamic and Stochastic," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 17(2), pages 187-206.
    • Handle: RePEc:taf:ijecbs:v:17:y:2010:i:2:p:187-206
    DOI: 10.1080/13571516.2010.483096
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/10.1080/13571516.2010.483096
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13571516.2010.483096?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Robert S. Pindyck, 1979. "The Structure of World Energy Demand," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661772, December.
    2. Koenig, Matthias & Meissner, Joern, 2010. "List pricing versus dynamic pricing: Impact on the revenue risk," European Journal of Operational Research, Elsevier, vol. 204(3), pages 505-512, August.
    3. Fleischmann, M. & Hall, J.M. & Pyke, D.F., 2005. "A Dynamic Pricing Model for Coordinated Sales and Operations," ERIM Report Series Research in Management ERS-2005-074-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kümmel, Reiner, 1982. "The impact of energy on industrial growth," Energy, Elsevier, vol. 7(2), pages 189-203.
    2. Margaret A. Walls, 1990. "Welfare Cost Of An Oil Import Fee," Contemporary Economic Policy, Western Economic Association International, vol. 8(2), pages 176-189, April.
    3. Seale, James L. & Solano, Alexis A., 2012. "The changing demand for energy in rich and poor countries over 25years," Energy Economics, Elsevier, vol. 34(6), pages 1834-1844.
    4. Razin, Assaf & Sadka, Efraim & Coury, Tarek, 2003. "Trade openness, investment instability and terms-of-trade volatility," Journal of International Economics, Elsevier, vol. 61(2), pages 285-306, December.
    5. Carlos de Miguel & Baltasar Manzano & José M. Mart'n-Moreno, 2006. "Oil shocks and the business cycle in Europe," Chapters, in: Carlos de Miguel & Xavier Labanderia & Baltasar Manzano (ed.), Economic Modelling of Climate Change and Energy Policies, chapter 12, pages 180-195, Edward Elgar Publishing.
    6. Wirl, Franz, 2009. "OPEC as a political and economical entity," European Journal of Political Economy, Elsevier, vol. 25(4), pages 399-408, December.
    7. Al-faris, Abdul-razak F., 1997. "Demand for oil products in the GCC countries," Energy Policy, Elsevier, vol. 25(1), pages 55-61, January.
    8. DAUBANES, Julien & LASSERRE, Pierre, 2011. "Optimum Commodity Taxation with a Non-Renewable Resource," Cahiers de recherche 03-2011, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    9. Huntington, Hillard G. & Barrios, James J. & Arora, Vipin, 2019. "Review of key international demand elasticities for major industrializing economies," Energy Policy, Elsevier, vol. 133(C).
    10. Erdogdu, Erkan, 2007. "Electricity demand analysis using cointegration and ARIMA modelling: A case study of Turkey," Energy Policy, Elsevier, vol. 35(2), pages 1129-1146, February.
    11. Mahmoud Dehghan Nayeri & Moein Khazaei & Fatemeh Alinasab-Imani, 2020. "The Critical Heuristics of Iranian Banking Credit System: Analysis of the Antithetical Opinions of the Beneficiaries," Systemic Practice and Action Research, Springer, vol. 33(3), pages 363-392, June.
    12. Assaf Razin & Efraim Sadka & Tarek Coury, 2002. "Trade Openness and Investment Instability," NBER Working Papers 8827, National Bureau of Economic Research, Inc.
    13. Bernardo Bertoldi & Chiara Giachino & Alberto Pastore, 2016. "Strategic pricing management in the omnichannel era," MERCATI & COMPETITIVIT?, FrancoAngeli Editore, vol. 2016(4), pages 131-152.
    14. McAusland, Carol, 2008. "Trade, politics, and the environment: Tailpipe vs. smokestack," Journal of Environmental Economics and Management, Elsevier, vol. 55(1), pages 52-71, January.
    15. Qudrat-Ullah, Hassan, 2014. "Green power in Ontario: A dynamic model-based analysis," Energy, Elsevier, vol. 77(C), pages 859-870.
    16. Clemens Haftendorn & Franziska Holz, 2008. "Analysis of the World Market for Steam Coal Using a Complementarity Model," Discussion Papers of DIW Berlin 818, DIW Berlin, German Institute for Economic Research.
    17. Ingram, Gregory K. & Zhi Liu, 1997. "Motorization and the provision of roads in countries and cities," Policy Research Working Paper Series 1842, The World Bank.
    18. Swait, Joffre & Eskeland, Gunnar S., 1995. "Travel mode substitution in Sao Paulo : estimates and implications for air pollution control," Policy Research Working Paper Series 1437, The World Bank.
    19. Erdogdu, Erkan, 2010. "Natural gas demand in Turkey," Applied Energy, Elsevier, vol. 87(1), pages 211-219, January.
    20. Anas, Alex & Hiramatsu, Tomoru, 2012. "The effect of the price of gasoline on the urban economy: From route choice to general equilibrium," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(6), pages 855-873.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:ijecbs:v:17:y:2010:i:2:p:187-206. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CIJB20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.