Developing a Spatial Pricing Model Considering Skimming Pricing Strategy

This article presents a new model for pricing a new product considering skimming pricing strategy in the presence of the competition. The problem is selecting marketplaces over marketplaces and deciding on a skimming price as well as an economy price for each marketplace in order to maximize the total profit. The derived model is a mixed integer non-linear programming model and we introduce an algorithm based on Taylor expansion to solve the model. After transforming the model, we solve iteratively a quadratic programming model for each marketplace to determine the best prices. An illustrative sample problem is presented and solved by proposed solution method. Finally some future research is proposed.

Keywords:

Spatial pricing , Skimming pricing , quadratic programming , mixed integer non- linear programming