Finding an acceptable price for a monopoly with stochastic demand

Finding an acceptable price for a monopoly with stochastic demand

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Article ID: iaor2000282
Country: Cuba
Volume: 19
Issue: 2/3
Start Page Number: 139
End Page Number: 151
Publication Date: May 1998
Journal: Revista de Investigacin Operacional
Authors: ,
Keywords: pricing
Abstract:

In this paper we study the determination of the optimal price, or at least a ‘sufficient optimal’ price, of a product, assuming a knowledge about the demand-price function, given stochastically, and given several production's cost structures. We use, basically, a determinist way in our calculations, but as we use demand's quantiles, we can build stochastic results about the price. Among the conclusions, it can be seen that, in certain realistic scenarios, the optimal price is almost insensible to the stochastic behavior of the demand, but in other realistic scenarios the optimal price is strongly sensible to the stochastic nature of the demand.

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