Optimal pricing model for adoption of new products influenced by peer effects

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.

Name thesis:degree_name

M.S.

Level thesis:degree_level

Thesis

Discipline thesis:degree_discipline

Electrical & Computer Engr

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2023

Author dc:creator

• Wang, Yijin

Contributors dc:contributor

• Bose, Subhonmesh
• Dong, Roy

• Optimal Control

Statement dc:rights

• Copyright 2023 Yijin Wang

Language dc:language

en, eng

Handle dc:identifier

https://hdl.handle.net/2142/122067

OAI record oai:identifier

https://www.ideals.illinois.edu/oai-pmh?verb=GetRecord&metadataPrefix=etdms&identifier=oai%3Awww.ideals.illinois.edu%3A2142%2F122067