Discount pricing in word-of-mouth marketing: An optimal control approach

Pengdeng Li, Xiaofan Yang, Yingbo Wu, Weiyi He and Pengpeng Zhao

Physica A: Statistical Mechanics and its Applications, 2018, vol. 505, issue C, 512-522

Abstract: This paper addresses the discount pricing in word-of-mouth (WOM) marketing. First, a dynamic model capturing WOM spreading processes is suggested. Second, the problem of finding an optimal discount strategy boils down to an optimal control problem. Third, the existence of an optimal control for the control problem is proved, and an optimality system for finding an optimal control is presented. Thereby, the dynamic discount strategy associated with the optimal control is recommended. Some examples of the optimal control are given. Finally, the influence of different factors on the optimal expected net profit is examined.

Keywords: Word-of-mouth marketing; Discount strategy; Dynamic model; Optimal expected net profit; Optimal control; Optimality system (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378437118303923
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:505:y:2018:i:c:p:512-522

DOI: 10.1016/j.physa.2018.03.062

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().