Optimal pricing of a new generation product when customers are strategic

In this research, we develop a mathematical model for new generation products in the presence of strategic customers . A firm that produces and sells a two-generation product is considered. It is assumed that potential customers of the first generation are strategic and may delay their purchase to the next generation. The firm aims to determine the optimal price by maximizing total profit. The optimal control theory is used for analyzing the proposed model. The results reveal that strategic behavior influences pricing strategy and reduces optimal price and firm’s profit.

Keywords:

New generation product , pricing , strategic customers , optimal control theory.