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Impact of Consumers’ Risk Attitude on a Firm’s Intertemporal Pricing Strategy
City University of Hong Kong, Hong Kong, China
City University of Hong Kong, Hong Kong, China
City University of Hong Kong, Hong Kong, China
- 1 City University of Hong Kong, Hong Kong, China
- 2 City University of Hong Kong, Hong Kong, China
- 3 City University of Hong Kong, Hong Kong, China
Theoretical Economics Letters·Volume 13 (2023)·Pages 880–889·Published 10 July 2023·DOI10.4236/tel.2023.134050
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Abstract
We consider a firm selling a new product to a market wherein customers are uncertain about their valuation of the product. This uncertainty can be resolved through a costly search for product information. The incentive which motivates the customers to engage in information search depends on their attitudes towards risk. There are two periods over which the firm can dynamically adjust the price to sell the product. Based on the price offered in each period, the customers choose either to search, to buy, or not to buy. We examine the optimal intertemporal pricing strategy under such settings and provide insights into how the firm should induce the customers of each type to search over time.
KeywordsConsumers’ Risk AttitudePricing Strategy
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