Existence and characterization of optimal dynamic pricing strategies with reference-price effects

Bertrand Crettez (), Naila Hayek () and Georges Zaccour
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Bertrand Crettez: Université Panthéon-Assas, Paris II, CRED
Naila Hayek: Université Panthéon-Assas, Paris II, CRED

Central European Journal of Operations Research, 2020, vol. 28, issue 2, No 5, 459 pages

Abstract: Abstract In this paper, we revisit the problem of existence of an optimal dynamic pricing strategy when the demand depends on a reference price. Using alternative assumptions and technique to those typically used in the literature, we show the existence of a unique pricing policy parametrized in the initial value of the reference price. Our main results are as follows: if this value is low enough, then the best option is to implement a penetration pricing. If it is high enough, then price skimming is optimal. If the initial reference price has an intermediate value, then constant pricing throughout the planning horizon is optimal.

Keywords: Reference price; Optimal pricing strategy; Optimization in infinite dimension; Discrete-time optimal control (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s10100-019-00645-w

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