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Optimal pricing of a conspicuous product during a recession that freezes capital markets

Author

Listed:
  • J.P. Caulkins

    (H. John Heinz III School of Public Policy & Management - H. John Heinz III School of Public Policy & Management)

  • G. Feichtinger

    (Department for Operations Research and Control Systems - TU Wien - Vienna University of Technology = Technische Universität Wien)

  • D. Grass

    (Department for Operations Research and Control Systems - TU Wien - Vienna University of Technology = Technische Universität Wien)

  • R.F. Hartl

    (Universität Wien = University of Vienna)

  • P.M. Kort

    (Tilburg University [Tilburg] - Netspar, Department of Economics - UA - University of Antwerp)

Abstract
This paper considers the problem of how to price a conspicuous product when the economy is in a recession that disrupts capital markets. A conspicuous product in this context is a luxury good for which demand is increasing in brand image. Brand image here means the ability of a consumer to impress observers by conspicuously displaying consumption of the good. Brand image is built up when the good is priced high enough to make it exclusive, and eroded if the good is discounted.

Suggested Citation

  • J.P. Caulkins & G. Feichtinger & D. Grass & R.F. Hartl & P.M. Kort, 2010. "Optimal pricing of a conspicuous product during a recession that freezes capital markets," Post-Print hal-00753047, HAL.
    • Handle: RePEc:hal:journl:hal-00753047
    DOI: 10.1016/j.jedc.2010.09.001
    Note: View the original document on HAL open archive server: https://hal.science/hal-00753047
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    References listed on IDEAS

    as
    1. Wilfred Amaldoss & Sanjay Jain, 2008. "—Trading Up: A Strategic Analysis of Reference Group Effects," Marketing Science, INFORMS, vol. 27(5), pages 932-942, 09-10.
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    3. Dieter Grass & Jonathan P. Caulkins & Gustav Feichtinger & Gernot Tragler & Doris A. Behrens, 2008. "Optimal Control of Nonlinear Processes," Springer Books, Springer, number 978-3-540-77647-5, January.
    4. Frijters, Paul, 1998. "A model of fashions and status," Economic Modelling, Elsevier, vol. 15(4), pages 501-517, October.
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    8. Caulkins, Jonathan P. & Hartl, Richard F. & Kort, Peter M. & Feichtinger, Gustav, 2007. "Explaining fashion cycles: Imitators chasing innovators in product space," Journal of Economic Dynamics and Control, Elsevier, vol. 31(5), pages 1535-1556, May.
    9. Wilfred Amaldoss & Sanjay Jain, 2010. "Reference Groups and Product Line Decisions: An Experimental Investigation of Limited Editions and Product Proliferation," Management Science, INFORMS, vol. 56(4), pages 621-644, April.
    10. Haunschmied, Josef L. & Kort, Peter M. & Hartl, Richard F. & Feichtinger, Gustav, 2003. "A DNS-curve in a two-state capital accumulation model: a numerical analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 27(4), pages 701-716, February.
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Chenavaz, Régis Y. & Dimitrov, Stanko & Figge, Frank, 2021. "When does eco-efficiency rebound or backfire? An analytical model," European Journal of Operational Research, Elsevier, vol. 290(2), pages 687-700.
    2. Chenavaz, Régis Y. & Eynan, Amit, 2021. "Advertising, goodwill, and the Veblen effect," European Journal of Operational Research, Elsevier, vol. 289(2), pages 676-682.
    3. Chenavaz, Régis Y. & Feichtinger, Gustav & Hartl, Richard F. & Kort, Peter M., 2020. "Modeling the impact of product quality on dynamic pricing and advertising policies," European Journal of Operational Research, Elsevier, vol. 284(3), pages 990-1001.
    4. Anil K. Agrawal & Amit Ambar Gupta & Manu K. Vora, 2021. "Optimal pricing and lot-sizing policies under promotional expense for some Veblen products," OPSEARCH, Springer;Operational Research Society of India, vol. 58(1), pages 83-108, March.
    5. Caulkins, Jonathan P. & Feichtinger, Gustav & Grass, Dieter & Hartl, Richard F. & Kort, Peter M. & Seidl, Andrea, 2017. "Interaction of pricing, advertising and experience quality: A dynamic analysis," European Journal of Operational Research, Elsevier, vol. 256(3), pages 877-885.
    6. Rubel, Olivier, 2018. "Profiting from product-harm crises in competitive markets," European Journal of Operational Research, Elsevier, vol. 265(1), pages 219-227.
    7. Caulkins, Jonathan P. & Feichtinger, Gustav & Grass, Dieter & Hartl, Richard F. & Kort, Peter M. & Seidl, Andrea, 2015. "Capital stock management during a recession that freezes credit markets," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 1-14.

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    More about this item

    Keywords

    C61; M31; Pricing; Recession; Conspicuous product; Optimal control; Skiba point;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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