Optimal pricing model for adoption of new products influenced by peer effects
Wang, Yijin
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https://hdl.handle.net/2142/122067
Description
Title
Optimal pricing model for adoption of new products influenced by peer effects
Author(s)
Wang, Yijin
Issue Date
2023-12-06
Director of Research (if dissertation) or Advisor (if thesis)
Bose, Subhonmesh
Dong, Roy
Department of Study
Electrical & Computer Eng
Discipline
Electrical & Computer Engr
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
M.S.
Degree Level
Thesis
Keyword(s)
Optimal Control
Language
eng
Abstract
The Bass diffusion model describes the dynamics of adoption of a new product in a population of potential customers. We present an optimal pricing model based on the Bass diffusion model which incorporates price. While there are existing models which depend on price, our formulation can be explained using individual utilities, or measures of reward, and in addition, is amenable to mathematical analysis. Namely, the value function, or maximum reward function, is Lipschitz continuous, and the search for the optimal price can be restricted to a bounded set. Furthermore, for a special case of the model parameters, we establish structural properties of the value function that facilitate algorithmic development for finding the optimal pricing strategy to maximize profits from adoption. Finally, we will provide examples of when the sufficient condition to the special case is violated and show that at least some of the desirable properties no longer hold.
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