Impact of anticipated competitive entry and cost experience on optimal strategic pricing of technological innovations

The optimal pricing policies for a new product over time are derived for a monopolist in the absence and presence of cost experience effects. The main results for a myopic monopolist facing a demand function previously employed by Bass suggest the following: – When competitive entry is anticipated, optimum prices and optimum profits are lower than their counterparts had it not been anticipated. – When cost experience is present, optimum prices are lower and optimum profits are higher than their counterparts had it not been present. For a monopolist maximizing the discounted profits over the planning horizon, the research shows that: – Optimal long-term prices are equal to optimal myopic prices in the absence of cost experience. – Optimal long-term prices are lower than myopic prices in the presence of cost experience.