Skip to main content
SpringerLink
Log in

Optimal normative policies for marketing of products with limited availability

  • Published:
Annals of Operations Research Aims and scope Submit manuscript

Abstract

We develop optimal normative policies for pricing and advertising of products with limited availability by including the traditional product diffusion parameters (Bass, 1969)–innovation and imitation, and the scarcity effects generated due to limited product availability (Swami and Khairnar, 2003). Using optimal control methodology, our pricing policy results suggest that a profit-maximizing firm gradually increases the price as the sales approach the product availability. The optimal normative advertising policy recommends gradually decreasing the expenditure on the awareness advertising and increasing the expenditure on the availability advertising as the product diffusion progresses. These results are illustrated with suitable numerical examples.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Bass, Frank M. (1969). “A New Product Growth Model for Consumer Durables,” Management Science 15 215–227.

    Google Scholar 

  • Bayus, B.L. (1994). “Optimal Pricing and Product Development Policies for New Consumer Durables,” International Journal of Research in Marketing 11, 249–259.

    Article  Google Scholar 

  • Cialdini, Robert B. (1985). Influence: Science and practice Glenview, IL: Scott, Foresman.

    Google Scholar 

  • Dockner, E. and S. Jorgensen. (1988). “Optimal Advertising Policies for Diffusion Models of New Product Innovation in Monopolistic Situations,” Management Science 34(1), 119–130.

    Google Scholar 

  • Feng, Y. and G. Gallego. (1995). “Optimal Starting Times and End-of-Season Sales and Optimal Stopping Times for Promotional Fares,” Management Science 41 (8), 1371–1391.

    Google Scholar 

  • Gallego, G. and van Ryzin. (1994). “Optimal Dynamic Pricing of Inventories with Stochastic Demand Over Finite Horizons,” Management Science 40 (8), 999–1020.

    Google Scholar 

  • Ho, Tech-Hua, Sergei Savin, and Christian Terwiesch. (2002). “Modeling Demand and Supply Dynamics in Constrained New Product Diffusion Under Supply Constraint,” Management Science 48 (2), 187–206.

    Article  Google Scholar 

  • Horsky, D. and L.S. Simon. (1983). “Advertising and the Diffusion of New Products,” Marketing Science 2 (Winter), 1–18.

    Google Scholar 

  • Inman, J. J., Anil C. Peter, and Priya Raghubir. (1997). “Framing the Deal: The Role of Restrictions in Accentuating Deal Value,” Journal of Consumer Research 24 (June), 68–79.

    Article  Google Scholar 

  • Jain, Dipak, Vijay Mahajan, and Eitan Muller. (1991). “Innovation Diffusion in the Presence of Supply Restrictions,” Marketing Science 10 (1), 83–90.

    Google Scholar 

  • Kamien, M. and N. Schwartz. (1981). Dynamic Optimization: The Calculus of Variations and Optimal Control Theory in Economics and Management. Amsterdam: North-Holland.

    Google Scholar 

  • Khairnar, Pankaj. (2000). “Product Diffusion under Conditions of Scarcity: Modeling, Analysis, and Applications,” Unpublished Masters Thesis, Dep. of Industrial & Management Engineering, IIT, Kanpur.

  • Kotler, Philip. (2000). Marketing Management: The Millennium Edition, Prentice Hall: New Delhi.

    Google Scholar 

  • Mahajan, V. and E. Muller. (1986). “Advertising Pulsing Policies for Generating Awareness for New Products,” Marketing Science 5 (2), 86–106.

    Google Scholar 

  • Sethi, S.P. and G.L. Thompson. (2000). Optimal Control Theory: Applications to Management Science and Economics, Second Edition, Kluwer Academic Publishers, Boston, 2000.

    Google Scholar 

  • Simon, Hermann. (1982). “ADPULS: An Advertising Model with Wearout and Pulsation,” Journal of Marketing Research 19 (August), 352–363.

    Article  Google Scholar 

  • Simon, Herman and Karl-Heinz Sebastian. (1987). “Diffusion and Advertising: The German Telephone Company,” Management Science 33 (April), 451–466.

    Google Scholar 

  • Swami, Sanjeev and Pankaj Khairnar. (2003). “Diffusion of Products with Limited Supply and Known Expiration Date,” Marketing Letters 14 (1), 33–46.

    Article  Google Scholar 

  • Vidale, M.L. and H.B. Wolfe. (1957). “An Operations Research Study of Sales Response to Advertising,” Operations Research 5 (3), 370–381.

    Google Scholar 

  • Weatherford, L.R. and S.E. Bodily. (1992). “A Taxonomy and Research Overview of Perishable-Asset Revenue Management: Yield Management, Overbooking and Pricing,” Operations Research 40 (5), 831–844.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Industrial and Management Engineering, Indian Institute of Technology, Faculty Building, 3rd Floor, Kanpur, 208016, India

    Sanjeev Swami (Assistant Professor)

  2. Tata Consultancy Services, Mumbai, India

    Pankaj J. Khairnar

Authors
  1. Sanjeev Swami
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Pankaj J. Khairnar
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Sanjeev Swami.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Swami, S., Khairnar, P.J. Optimal normative policies for marketing of products with limited availability. Ann Oper Res 143, 107–121 (2006). https://doi.org/10.1007/s10479-006-7375-0

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10479-006-7375-0

Keywords

Search

Navigation