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Optimal Price-Quality Schedules and Sustainability

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  • Kim, Jong Seok

Abstract

This paper derives a general solution for optimal price-quality scheduling under imperfect information. The solution is general in the sense that it generates the first-best, the second-best, and the profit-maximizing solutions depending on the weights in the objective function. The important assumption is that the fixed setup cost is related to the range of qualities produced by a firm. This paper also demonstrates a nonlinear version of the occasional incompatibility between the second-best pricing and sustainability, and derives the conditions for sustainability of the second-best price-quality schedule. Copyright 1987 by Blackwell Publishing Ltd.

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  • Kim, Jong Seok, 1987. "Optimal Price-Quality Schedules and Sustainability," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 231-244, December.
    • Handle: RePEc:bla:jindec:v:36:y:1987:i:2:p:231-44
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    Cited by:

    1. Selim, Tarek, 2006. "Spatial Competition in a Differentiated Market with Asymmetric Costs," MPRA Paper 119499, University Library of Munich, Germany.
    2. Tarek Selim, 2004. "Endogenous quality choice: price and quantity competition," Economics Bulletin, AccessEcon, vol. 28(3), pages 1.
    3. McAfee, R. Preston, 2007. "Pricing Damaged Goods," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 1, pages 1-19.

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