Optimal pricing for a short life-cycle product when customer price-sensitivity varies over time

Hongmin Li, Woonghee Tim Huh

Research output: Contribution to journalArticle

10 Scopus citations

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 languageEnglish (US)
Pages (from-to)552-576
Number of pages25
JournalNaval Research Logistics
Volume59
Issue number7
DOIs
StatePublished - Oct 1 2012

Keywords

  • discrete pricing
  • prespecified pricing strategy
  • product life cycle
  • time-varying price sensitivity

ASJC Scopus subject areas

  • Modeling and Simulation
  • Ocean Engineering
  • Management Science and Operations Research

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