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New Product Pricing in Quality Sensitive Markets

Author

Listed:
  • Stephen A. Smith

    (University of Santa Clara)

Abstract

This paper considers the problem of pricing a new product in a market having competing products of different qualities and market penetration levels, as measured by the cumulative number of units sold. Each customer type selects his optimal product based on maximizing consumer surplus. Pricing policies for a new product are determined for the seller based on cumulative profit maximization without discounting. An example is solved in detail for two demand function forms.

Suggested Citation

  • Stephen A. Smith, 1986. "New Product Pricing in Quality Sensitive Markets," Marketing Science, INFORMS, vol. 5(1), pages 70-87.
    • Handle: RePEc:inm:ormksc:v:5:y:1986:i:1:p:70-87
    DOI: 10.1287/mksc.5.1.70
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    Citations

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    Cited by:

    1. van Cranenburgh, Sander & Chorus, Caspar G., 2017. "Willingness to Pay-inference in the absence of rejected propositions," Journal of Retailing and Consumer Services, Elsevier, vol. 39(C), pages 35-42.
    2. Tannous, George F. & Mangiameli, Paul M., 1996. "Adding features to a product: A micro-economic model," International Review of Economics & Finance, Elsevier, vol. 5(2), pages 149-173.
    3. Glen M. Schmidt & Evan L. Porteus, 2000. "The Impact of an Integrated Marketing and Manufacturing Innovation," Manufacturing & Service Operations Management, INFORMS, vol. 2(4), pages 317-336, April.
    4. Amit Mehra & Gireesh Shrimali, 2008. "Introduction of Software Products and Services Through "Public" Beta Launches," Working Papers 08-11, NET Institute.
    5. Wilhelm, Wilbert E. & Xu, Kaihong, 2002. "Prescribing product upgrades, prices and production levels over time in a stochastic environment," European Journal of Operational Research, Elsevier, vol. 138(3), pages 601-621, May.
    6. Paat Rusmevichientong & Benjamin Van Roy & Peter W. Glynn, 2006. "A Nonparametric Approach to Multiproduct Pricing," Operations Research, INFORMS, vol. 54(1), pages 82-98, February.
    7. Kanishka Misra & Eric M. Schwartz & Jacob Abernethy, 2019. "Dynamic Online Pricing with Incomplete Information Using Multiarmed Bandit Experiments," Marketing Science, INFORMS, vol. 38(2), pages 226-252, March.
    8. Braden, J. B. & Kolstad, C. D. & Woock, R. A. & Machado, J. A., 2001. "Is coal desulphurisation worthwhile? Evidence from the market," Energy Policy, Elsevier, vol. 29(3), pages 217-225, February.

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