Dynamic quality policies with reference quality effects

Régis Chenavaz

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Abstract: Dynamic pricing policies with reference-price demand have been intensely analysed. Less studied are dynamic quality policies with reference-quality demand. This article studies the dynamic quality policy of a firm whose consumers use a reference point in their decision-making, in line with the principles of behavioural economics. More specifically, I consider reference quality formation in an optimal control setting. By solving on the basis of Pontryagin's maximum principle, I obtain analytical solutions to the optimal quality policy. The managerial implications of quality reference for dynamic quality policy are discussed.

Keywords: Dynamic quality; product quality; reference quality; behavioural economics; optimal control (search for similar items in EconPapers)
Date: 2017-07
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Citations: View citations in EconPapers (6)

Published in Applied Economics, 2017, 49 (32), pp.3156 - 3162. ⟨10.1080/00036846.2016.1254345⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01685879

DOI: 10.1080/00036846.2016.1254345

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