Optimal Pricing Strategy for New Products

Trichy V. Krishnan · Frank M. Bass · Dipak C. Jain

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Innovation Diffusion and Forecasting Supply Chain and Inventory Management Consumer Market Behavior and Pricing

Abstract

Robinson and Lakhani (1975) initiated a long research stream in marketing when they used the Bass model (1969) to develop optimal pricing path for a new product. A careful analysis of the extant literature reveals that the research predominantly suggests that the optimal price path should be largely based on the sales growth pattern. However, in the real world we rarely find new products that have such pricing pattern. We observe either a monotonically declining pricing pattern or an increase-decrease pricing pattern that does not seem close to the sales path. In this paper, we use a variation of the generalized Bass model (called GBM) developed by Bass et al. (1994) that yields optimal pricing policies that are consistent with empirical data.

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References

1969A New Product Growth for Model Consumer Durables 1976A New Product Growth Model for Consumer Durables 1972Microeconomic theory: basic principles and extensions 1994Why the Bass Model Fits without Decision Variables 1975Dynamic Price Models for New-Product Planning 1985A New Product Adoption Model with Price, Advertising, and Uncertainty 1980The Relationship Between Diffusion Rates, Experience Curves, and Demand Elasticities for Consumer Durable Technological Innovations 1983Monopolist Pricing with Dynamic Demand and Production Cost

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