Two-Period Pricing Model for Walk-in Potential Consumers with Normal Distribution of the Price of Their Willing to Buy

Abstract

The optimal model was mainly constructed for the products, such as real estates, amusement park, or major furniture which themselves cannot be moved or worn to reveal to other consumers in public, to explain their optimal promotional pricing strategy. The study adopted the dual sources of the diffusion power, the number of walk-in potential consumers and the price level of the product, in the extended Bass Diffusion Model. Given periods of [0 , T ) and [ T, ¯ T ), T < ¯ T , and ¯ T maybe ∞ when a firm attempts to decide price P 0 within [0 , T ) and price P T within [ T, ¯ T ), respectively, to achieve the goal of maximizing discounted profit in the interval [0 , ¯ T ), the characteristics of its optimal solution ( P ∗ 0 , P ∗ T ) at each period were rigorously derived and profoundly discussed. This two-period model pricing could be extended to an infinite multiple-period optimal pricing model to become the issue of price control. The study would further conclude that, after a new product is initialized, its price should decline with time to take advantage of it with exhausting the consumer surplus of consumers.