Modeling the impact of product quality on dynamic pricing and advertising policies
Chenavaz,Régis Y. Feichtinger,Gustav Hartl,Richard F. Kort,Peter M.
Chenavaz,Régis Y.
Feichtinger,Gustav
Hartl,Richard F.
Kort,Peter M.
Abstract
The marketing-mix of price–quality and advertising–quality relationship is well studied. Less understood is the price–advertising–quality relationship. This article fills the gap, investigating the interplay between price, advertising, and quality in an optimal control model. Our results generalize the condition of Dorfman–Steiner in a dynamic context. Also, they point to the impact of greater product quality on the dynamic policies of pricing and advertising. Furthermore, a phase diagram analysis shows that quality develops monotonically in time and converges to a unique steady state. We also show that quality investment could either decrease or increase over time but this depends on its effectiveness. Our results spot the profitable opportunities of a firm managing a more complex marketing-mix.
Description
Date
2020-08-01
Journal Title
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Volume Title
Publisher
Research Projects
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Journal Issue
Keywords
Condition of Dorfman–Steiner, Dynamic advertising, Dynamic pricing, Marketing mix, Price–advertising–quality relationship
Citation
Chenavaz, R Y, Feichtinger, G, Hartl, R F & Kort, P M 2020, 'Modeling the impact of product quality on dynamic pricing and advertising policies', European Journal of Operational Research, vol. 284, no. 3, pp. 990-1001. https://doi.org/10.1016/j.ejor.2020.01.035