סמינר בשיווק

This paper develops an empirical model that examines the problem of finding the optimal long-term pricing in competition, where consumers gain information through trying products, but gradually forget the gained information.

Many markets practice a behavior of cyclic sales, where brands in the market reduce their prices for limited time periods and return the prices to the previous levels in a cyclic manner. Literature has attributed this pricing behavior to the dynamics of consumers' trying and forgetting effects and these were studied both theoretically and empirically. However, a complete system that connects the demand estimations to the brands' behavior was examined in theoretical setting only, in monopoly and duopoly market structures.

This paper builds a model that includes both demand and supply sides. It estimates a discrete choice based system that includes heterogeneous effects. Then the demand estimands are taken to the supply side, where the outcome of an infinite dynamic game using the equilibrium concept is simulated. Using a unique data and market settings allows the identification of the trying and forgetting effects and the results of the estimation are consistent with previous literature.

The pricing system, which optimizes profits, contributes both to the literature and to practitioners as it does not only finds the sales schedules and lengths, but also provides the optimal pricing for each brand and for each period of time along the dynamic game in equilibrium.

Moreover, the suggested model and technique does not limit the number of agents, consumer types, periods, and states of the dynamic game.

In addition, the paper estimates market shares and profits when the trying and forgetting dynamics are added to the demand and supply models, and it shows that considering these effects has a great value to brands and especially to brands that enter mature markets.