A Friction Model for Describing and Forecasting Price Changes

Wayne S. DeSarbo, Vithala R. Rao, Joel H. Steckel, Jerry Wind and Richard Colombo
Additional contact information
Wayne S. DeSarbo: Southern Methodist University
Vithala R. Rao: Cornell University
Joel H. Steckel: Columbia University
Jerry Wind: University of Pennsylvania
Richard Colombo: New York University

Marketing Science, 1987, vol. 6, issue 4, 299-319

Abstract: This paper presents a new friction model for describing the price changes of a product or brand over time and for forecasting both the timing and magnitude of such changes from one period to the next. After a review of the related pricing literature, we present our model and a modified controlled random search procedure for estimating its parameters. The model is applied to describe and forecast the weekly mortgage interest rates for a local bank in the Philadelphia area. Finally, limitations and several potential applications of this methodology are discussed.

Keywords: friction model; price changes; price reaction; description; forecasting (search for similar items in EconPapers)
Date: 1987
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:6:y:1987:i:4:p:299-319

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