TITLE:
Impact of Consumers’ Risk Attitude on a Firm’s Intertemporal Pricing Strategy
AUTHORS:
Grace Kiang, Lu Qiang, Wei-Yu Kevin Chiang
KEYWORDS:
Consumers’ Risk Attitude, Pricing Strategy
JOURNAL NAME:
Theoretical Economics Letters,
Vol.13 No.4,
August
14,
2023
ABSTRACT: We consider a firm selling a new product to a market wherein customers are
uncertain about their valuation of the product. This uncertainty can be resolved
through a costly search for product information. The incentive which motivates the
customers to engage in information search depends on their attitudes towards risk.
There are two periods over which the firm can dynamically adjust the price to sell
the product. Based on the price offered in each period, the customers choose either
to search, to buy, or not to buy. We examine the optimal intertemporal pricing strategy
under such settings and provide insights into how the firm should induce the customers
of each type to search over time.