Abstract
Technology products often experience a life-cycle demand pattern that resembles a diffusion process, with weak demand in the beginning and the end of the life cycle and high demand intensity in between. The customer price-sensitivity also changes over the life cycle of the product. We study the prespecified pricing decision for a product that exhibits such demand characteristics. In particular, we determine the optimal set of discrete prices and the times to switch from one price to another, when a limited number of price changes are allowed. Our study shows that the optimal prices and switching times show interesting patterns that depend on the product's demand pattern and the change in the customers' price sensitivity over the life cycle of the product.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 552-576 |
| Number of pages | 25 |
| Journal | Naval Research Logistics |
| Volume | 59 |
| Issue number | 7 |
| DOIs | |
| State | Published - Oct 2012 |
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Keywords
- discrete pricing
- prespecified pricing strategy
- product life cycle
- time-varying price sensitivity
ASJC Scopus subject areas
- Ocean Engineering
- Modeling and Simulation
- Management Science and Operations Research
Cite this
Optimal pricing for a short life-cycle product when customer price-sensitivity varies over time. / Li, Hongmin; Huh, Woonghee Tim.
In: Naval Research Logistics, Vol. 59, No. 7, 10.2012, p. 552-576.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Optimal pricing for a short life-cycle product when customer price-sensitivity varies over time
AU - Li, Hongmin
AU - Huh, Woonghee Tim
PY - 2012/10
Y1 - 2012/10
N2 - Technology products often experience a life-cycle demand pattern that resembles a diffusion process, with weak demand in the beginning and the end of the life cycle and high demand intensity in between. The customer price-sensitivity also changes over the life cycle of the product. We study the prespecified pricing decision for a product that exhibits such demand characteristics. In particular, we determine the optimal set of discrete prices and the times to switch from one price to another, when a limited number of price changes are allowed. Our study shows that the optimal prices and switching times show interesting patterns that depend on the product's demand pattern and the change in the customers' price sensitivity over the life cycle of the product.
AB - Technology products often experience a life-cycle demand pattern that resembles a diffusion process, with weak demand in the beginning and the end of the life cycle and high demand intensity in between. The customer price-sensitivity also changes over the life cycle of the product. We study the prespecified pricing decision for a product that exhibits such demand characteristics. In particular, we determine the optimal set of discrete prices and the times to switch from one price to another, when a limited number of price changes are allowed. Our study shows that the optimal prices and switching times show interesting patterns that depend on the product's demand pattern and the change in the customers' price sensitivity over the life cycle of the product.
KW - discrete pricing
KW - prespecified pricing strategy
KW - product life cycle
KW - time-varying price sensitivity
UR - http://www.scopus.com/inward/record.url?scp=84866035995&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84866035995&partnerID=8YFLogxK
U2 - 10.1002/nav.21506
DO - 10.1002/nav.21506
M3 - Article
VL - 59
SP - 552
EP - 576
JO - Naval Research Logistics
JF - Naval Research Logistics
SN - 0894-069X
IS - 7
ER -