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Strategic pricing of differentiated consumer durables in a dynamic duopoly: A numerical analysis
Author(s) -
Nascimento Fernando,
Vanhonacker Wilfried R.
Publication year - 1993
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090140302
Subject(s) - duopoly , profit (economics) , dynamic pricing , microeconomics , economics , pricing strategies , differential game , market share , mathematical optimization , mathematics , finance , cournot competition
Under different modes of competitive pricing behavior, profit‐maximizing price trajectories are derived for durable products in a dynamic duopoly. Open‐loop co‐operative and non‐cooperative pricing behavior is analyzed within a comprehensive model where sales of differentiated products are described by interlocked diffusion processes with realistic demand characteristics. Because of analytic complexity, the optimal trajectories implied by the control and differential‐game problems are derived numerically across an extensive set of plausible market scenarios. Manipulation of initial market conditions enables derivation of optimal competitive pricing as a function of timing of entry.