Optimal price skimming by a monopolist facing rational consumers

Article Abstract:

The problem of intertemporal pricing is analyzed for marketing a novel product. The important factor of the analysis contributing to understanding intertemporal pricing is that the examination assumes that customers are intertemporal utility maximizers. The examination characterizes a subgame perfect Nash equilibrium pricing procedure that is shown to involve intertemporal price discrimination, and then compares the policy to the optimal procedure for a monopolist facing customers who are myopic. Research results indicate that the suggestion of customer rationality demonstrates a large variation in optimal prices. If a monopolist dealing with rational consumers develops a positive myopic customer pricing procedure, profits may be reduced significantly as compared to profits achieved by utilizing an equilibrium pricing procedure for customers who are rational.

Dynamic programming

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Competitive dealing strategy and deal value escalation

Article Abstract:

Research on a company in a monopolistically competitive, price partitioned market with competitive dealing is described, in order to derive the revenue maximizing deal value. The market has two brands and consumers with heterogeneous responses to deals. When considering a number of competitors sufficiently large that at least one is dealing in each period, a stable equilibrium is not produced and a reactive dealing strategy based on a single optimal deal value produces negative profits.

Management science, Stochastic analysis, Employee promotions

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