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DYNAMIC INTERACTION OF PRICE AND DESIGN QUALITY FOR PRODUCTS WITH CONVEX PRODUCTION COSTS
Author(s) -
KOUVELIS PANAGIOTIS,
MALLICK DEBASISH N.,
MUKHOPADHYAY SAMAR K.
Publication year - 1997
Publication title -
production and operations management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.279
H-Index - 110
eISSN - 1937-5956
pISSN - 1059-1478
DOI - 10.1111/j.1937-5956.1997.tb00481.x
Subject(s) - production (economics) , quality (philosophy) , product (mathematics) , quality costs , dynamic pricing , position (finance) , value (mathematics) , industrial organization , business , marketing , microeconomics , computer science , economics , activity based costing , mathematics , philosophy , geometry , epistemology , finance , machine learning
Price and design quality define value for customers and are often used by firms to position products in the marketplace. Setting price and quality level on a new product for the first time and making appropriate changes over time to these variables to reflect changing conditions in the market requires careful coordination of design, manufacturing, and marketing variables. We present a control theoretic model to study the complex interaction among price, quality, and cost during the life cycle of a product. Our model considers the major design‐manufacturing‐marketing tradeoffs and helps determine optimal pricing, design quality, and production strategies in a dynamic environment with convex production costs.