A Three-Stage Stochastic Dynamic Pricing Game Model Affected by New Products into the Market

Abstract

In real-life marketing, a common phenomenon is that the prices of current product will have been cut down even the new product has not gone into market yet. Thus, it is very important for merchant to set the strategy which can make the excepted revenue maximum. So, this paper constructs a three-stage stochastic dynamic pricing game model for analyzing the influence of the uncertainty of entry timing of the new products on pricing of products being sold. By analyzing of the pricing strategy, there are big differences in the predictions of new product going into market between merchant and customers; the merchant will adopt cutting price for promotion strategy to reduce negative influence of the new products on the demand of the products sold now. Otherwise, the merchant will adopt the strategy of maximizing current period’s profit.