Abstract
We study optimal pricing strategies and consequent market shares’ dynamics in a transition from an old and established technology to a new one. We simulate an agent-based model, in which a large population of possible buyers decide whether to adopt or not depending on prices, private signals and herding behavior. The firm, on its part, sets prices to maximize revenues. We show that trade-in programs, in practice comparable to very aggressive discounts, are supported by a rational attitude.
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Notes
- 1.
Ranges for p 1, p 2A and p 2U have been selected after some preliminary explorations of the location of optimal solutions.
- 2.
The prevailing market share is obtained simulating repeated adoptions till convergence is reached: in the first round a fraction of x 1 agents will adopt according to (1) even in the absence of other adopters; in the second round more agents will join based on the current x 1 and the total fraction rises to x 2; the process continues till the adopters’ share stabilizes at some t, i.e., \(x_{t} = x_{t+1}\). The prevailing market share is then defined to be x N = x t .
- 3.
The prevailing market shares are obtained as in period 1, using fictitious rounds of adoptions till convergence is reached.
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Acknowledgements
The authors thank Marco LiCalzi for insightful comments and discussions and participants to seminars held at XXXVII AMASES meeting, Stresa; Collegio Carlo Alberto, Torino and Alpen-Adria Universität, Klagenfurt. We received financial support from MIUR under grant “Robust decision making in markets and organizations” (PRIN20103S5RN3).
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Pellizzari, P., Sartori, E., Tolotti, M. (2015). Trade-In Programs in the Context of Technological Innovation with Herding. In: Amblard, F., Miguel, F., Blanchet, A., Gaudou, B. (eds) Advances in Artificial Economics. Lecture Notes in Economics and Mathematical Systems, vol 676. Springer, Cham. https://doi.org/10.1007/978-3-319-09578-3_18
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DOI: https://doi.org/10.1007/978-3-319-09578-3_18
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