R. Chenavaz, G. Feichtinger, R.F. Hartl, P.M. Kort:
"Modeling the impact of product quality on dynamic pricing and advertising policies";
European Journal of Operational Research,
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.
Price-advertising-quality relationship, Dynamic pricing, Dynamic advertising, Marketing mix, Condition of Dorfman-Steiner
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