Intertemporal pricing strategies for fashion tech products with consumer externalities

Abstract

Fashion tech products have both fashion elements and functional elements. These dual attributes lead to two opposite consumption externalities: on one hand, the fewer users, the more utilities she can get; on the other hand, a consumer will be more likely to buy when there are more buyers. Taking these two opposite effects into account, we study the optimal intertemporal pricing strategies assuming that customers are heterogeneous in their intrinsic values of the product. Our results suggest how firms should adjust their optimal pricing strategies under different market circumstances.