DASH, MINATI; PHD
NEW YORK UNIVERSITY, GRADUATE SCHOOL OF BUSINESS ADMINISTRATION, 1982
BUSINESS ADMINISTRATION, MARKETING (0338)
This dissertation is concerned with determining the optimal pricing and advertising
policy for an
innovative product sold by a monopolist firm. It is assumed that unit production
cost declines as
cumulative production increases, due to 'learning', and also that individuals'
reservation prices for the
product are distributed as a linear function of the disposable income. As price
declines, more people
come into the market, given that they have been made aware of the product by
advertising, or by seeing
it. Given product affordability and awareness, an individual's probability of
purchase is modelled by a
diffusion of innovation process, that is, it is expressed as a constant plus
a function of the number of
people who have already bought the product. These hypotheses are used to develop
a model of sales
and profits as a function of price and advertising, which is optimized using
control theory. This work
substantially extends the work of Bass (1980) and Teng and Thompson (1980) in
two ways. First, it
explicitly considers the role of advertising and develops joint advertising
and pricing policies. Second the
model of purchase probability is based on a set of hypotheses about individual
buyer behavior rather
than aggregate considerations.
Social
Systems Simulation Group
P.O. Box 6904 San Diego, CA 92166-0904 Roland Werner, Principal Phone/FAX (619) 660-1603 |