Optimal Price-Quality Schedules and Sustainability

Jong Seok Kim

Journal of Industrial Economics, 1987, vol. 36, issue 2, 231-44

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.

Date: 1987
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