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Article: Periodic price reduction as a way to boost diminishing demand
Title | Periodic price reduction as a way to boost diminishing demand |
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Authors | |
Keywords | Price discounts Intertemporal pricing Dynamic oligopoly Dynamic programming Shifting demand |
Issue Date | 2012 |
Publisher | Omics Publishing Group. The Journal's web site is located at http://www.omicsgroup.org/journals/bsfahome.php |
Citation | Journal of Business and Financial Affairs, 2012, v. 1 n. 2, article no.102 How to Cite? |
Abstract | In this paper, I offer a new theory for why price reductions take place on a regular basis in some industries. I suggest that the demand for a firm’s product drops over time because of the erosion of consumers’ brand recall, and that price discounts are utilized to boost the diminishing demand. A dynamic model is then constructed to demonstrate the theory for both monopoly and duopoly competition. I show that it is optimal for a monopolist to alternate between a constant high (normal) price and a constant low (discount) price with fixed frequency, and that competing firms offer discounts at the same time in duopoly competition. |
Persistent Identifier | http://hdl.handle.net/10722/164746 |
ISSN |
DC Field | Value | Language |
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dc.contributor.author | Zhou, W | en_US |
dc.date.accessioned | 2012-09-20T08:09:03Z | - |
dc.date.available | 2012-09-20T08:09:03Z | - |
dc.date.issued | 2012 | en_US |
dc.identifier.citation | Journal of Business and Financial Affairs, 2012, v. 1 n. 2, article no.102 | en_US |
dc.identifier.issn | 2167-0234 | - |
dc.identifier.uri | http://hdl.handle.net/10722/164746 | - |
dc.description.abstract | In this paper, I offer a new theory for why price reductions take place on a regular basis in some industries. I suggest that the demand for a firm’s product drops over time because of the erosion of consumers’ brand recall, and that price discounts are utilized to boost the diminishing demand. A dynamic model is then constructed to demonstrate the theory for both monopoly and duopoly competition. I show that it is optimal for a monopolist to alternate between a constant high (normal) price and a constant low (discount) price with fixed frequency, and that competing firms offer discounts at the same time in duopoly competition. | - |
dc.language | eng | en_US |
dc.publisher | Omics Publishing Group. The Journal's web site is located at http://www.omicsgroup.org/journals/bsfahome.php | - |
dc.relation.ispartof | Journal of Business and Financial Affairs | en_US |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.subject | Price discounts | - |
dc.subject | Intertemporal pricing | - |
dc.subject | Dynamic oligopoly | - |
dc.subject | Dynamic programming | - |
dc.subject | Shifting demand | - |
dc.title | Periodic price reduction as a way to boost diminishing demand | en_US |
dc.type | Article | en_US |
dc.identifier.email | Zhou, W: wzhou@business.hku.hk | en_US |
dc.identifier.authority | Zhou, W=rp01128 | en_US |
dc.description.nature | published_or_final_version | - |
dc.identifier.doi | 10.4172/2167-0234.1000102 | - |
dc.identifier.hkuros | 207871 | en_US |
dc.identifier.volume | 1 | en_US |
dc.identifier.issue | 2, article no.102 | - |
dc.publisher.place | United States | - |
dc.identifier.issnl | 2167-0234 | - |