Price Skimming Research Articles

The Art of Balancing Price and Plug: Developing a Theoretical Model for Dynamic Pricing in the Electric Vehicle Market

This study presents a novel approach to understanding the complex dynamics of the electric vehicle (EV) market through the lens of differential game theory. We developed a comprehensive model that captures the strategic interactions between EV manufacturers and charging network operators, while incorporating the effects of consumer behavior, market uncertainties, and reference price effects. Using differential game theory, we examined the impact of reference price effects and the charging network’s influence on pricing strategies, focusing on three distinct approaches: basic pricing, static pricing considering reference price effects, and dynamic pricing strategies. Our model offers new insights into consumer behavior and price expectations in the rapidly evolving EV market. The key findings reveal that under static or dynamic pricing strategies, the optimal pricing for EV manufacturers is positively correlated with the initial reference price. When the initial reference price is high (low), the optimal pricing strategy resembles skimming pricing (penetration pricing). As the effort level of charging network operators increases and their influence on consumers’ purchase decisions grows stronger, EV manufacturers tend to set higher prices. Notably, while dynamic pricing strategies can optimize EV manufacturers’ profits, the profits of charging network operators may decrease compared with static pricing strategies. This integrated approach significantly contributes to the field by bridging gaps among market dynamics, pricing strategies, and the infrastructure’s development in the context of electric mobility, providing a comprehensive framework for understanding and optimizing the EV ecosystem. Ultimately, this study advances sustainable business models that balance profitability, consumer behavior, and the infrastructure’s growth in the rapidly evolving EV market.

Single rollover or dual rollover: How a monopoly NEV manufacturer responds to NEV credit policy

The NEV credit policy plays a crucial role in advancing the new energy vehicle (NEV) industry and environmental conservation. This study investigates the monopoly NEV manufacturer’s optimal rollover strategy (Single Rollover (SR) vs. Dual Rollover (DR)) and pricing scheme (skimming vs. penetration) under the government’s stricter calculation criteria for NEV credit policy, considering a two-period market with strategic consumers. We find that the NEV manufacturer typically adopts a skimming pricing scheme in DR strategy, while a penetration pricing scheme in SR strategy. The choice between SR and DR strategy hinges on the government’s calculation criteria for NEV credits, product upgrade speed, and vehicle environmental performance improvement. When the calculation criterion for NEV credits is moderate, or when it is low, coupled with fast product upgrade speed and marginal improved environmental performance of the new vehicle, SR strategy is beneficial to the NEV manufacturer to avoid the cannibalization between new and old vehicles. In contrast, the NEV manufacturer can benefit from DR strategy through price discrimination between new and old vehicles to attract consumers from different market segments. However, stricter calculation criteria for NEV credits do not always result in higher social welfare.

To Skim or not to Skim: Studying the Optimal Pricing Strategy for Technology Products

Pricing of technology products often follows a skimming strategy in which a firm charges the highest price at product launch then reduces the price over time to attract additional buyers. Price-skimming has not been adequately examined in the literature related to technology products. Most pricing models proposed in the literature consider only initial product purchases while ignoring repeat purchases. However, for technology products, frequent upgrades often result in substantial repeat purchases. To fill this void, we develop an optimization model that accounts for both initial and repeat purchases. We find that the effectiveness of price skimming is highly dependent on the rate of repeat purchases. When the repeat purchase rate is low, firms may be better off delaying price reduction to accumulate more profit earlier in the product lifecycle, thus compensating for the decline in sales that occurs later in the lifecycle. For example, price skimming may not be the optimal pricing strategy for fad products with low repeat-purchase rates due to the product losing popularity in a short time period. Furthermore, contrary to common expectations, in markets highly sensitive to price changes firms may get away with charging a higher introductory price but must decrease the price over time to motivate sales.

Pricing Strategies and Consumer Purchase Decision of Products in Department of Marketing, Akwa Ibom State University, Obio Akpa Campus, Nigeria

This study was conducted to determine the relationship between pricing strategies and consumer purchase decision of products in the Department of Marketing, Akwa Ibom State University, Nigeria. The survey research design was used in the study. Data for the study were obtained through questionnaires administered to the respondents. The entire 220 respondents of the Department of Marketing were studied using a census sampling technique. Three hypotheses were formulated and tested at the 0.05 level of significance. Data obtained were analyzed using the descriptive and inferential methods. Descriptive statistics including mean, standard deviation, kurtosis and skewness were computed for all research variables while Pearson Product Moment Correlation (PPMC) was used to examine the bivariate relationship between research variables. To test the stated hypotheses, multiple linear regression was used and statistical significance was established at 0.05. The findings of the study revealed a significant negative correlation between skimming pricing and consumer purchase decision (r = -.175, p<.05) while both penetrating pricing (r = .326, p<.05) and discount pricing (r = .781, p<.01) were found to have significant positive relationship with consumer purchase decision. Based on the findings of the study, it was recommended that manufacturers and marketers of products should continuously use a type of pricing strategy that is favorable to consumers to attract repeat purchases and patronage.

Is It Better for a Publisher to Release an Audiobook after Its E-Book Version?

The e-books industry is mature, and audiobooks are becoming increasingly popular. More and more publishers are coming to realize that audiobooks could be a potential revenue driver and intend to release audiobooks. Considering that there is a certain substitutability between e-books and audiobooks, publishers need to decide how to release a book in its audible version and its e-book version into the market. In this paper, we incorporate the discount factor and the consumers’ acceptance level for audiobooks into the consumer utility by dividing consumers into two types, high-value type and low-value type, and construct two different release models: releasing the audiobook and the e-book simultaneously and releasing the audiobook after the e-book. Using an optimization tool, we investigate pricing strategies of a monopolistic publisher under two different release models. By comparing the theoretical results of the two models, we find that when the consumers’ patience exceeds a certain threshold, releasing a book in its audible version after its e-book version is better for the publisher, and the publisher should adopt a skimming (refers to decreasing markups over time) pricing strategy for the e-book in this case. Further, the publisher should set a higher price for the audiobook than the e-book, whether or not they release the audiobook after the e-book. In addition, we conduct a numerical analysis to investigate how the discount factor, the percentage of high-value consumers, and the high-value consumers’ acceptance level for audiobooks affect the consumer surplus and the social welfare. This study offers publishers some managerial insights into the complex issues involving pricing and release strategies.

Advance selling strategy and pricing decisions with online reviews

AbstractMotivated by marketing practices in advance selling, this paper studies the optimal pricing decisions and advance selling strategy with online reviews. The firm may charge a full or partial price in advance selling and then determine whether to continue selling products in the spot market. We characterize the equilibrium pricing decisions, selling scheme, and advance selling strategy in the monopoly market. We find that no matter what kind of advance selling strategy is implemented, the firm should choose the two‐period selling scheme instead of the one‐period one to market the product. Notably, when the two‐period selling scheme is chosen, either the skimming pricing or the penetration pricing may be optimal for the firm. Specifically, when the review valence is significantly lower, the skimming pricing is always favored by the firm; otherwise, the penetration pricing is more profitable. Moreover, the disclosure quality and review valence jointly affect the choice of firm's optimal advance selling strategy. In detail, advance selling with a full‐price strategy is always dominant if the disclosure quality is high; otherwise, the firm's optimal advance selling strategy is determined by the review valence. Meanwhile, we also analyze several extensions to explore meaningful insights and provide decision‐making support for the firm facing a complex marketing environment.

Extending a Product Line With a Product Applying Green Technology

Given the rise in consumers’ ecological awareness, many firms currently offering only nongreen products are extending their product lines with products applying green technology. We examine a monopolist's product line extension strategy and pricing strategy by explicitly considering the environment-related utility and spillover effects of a green product. The results show that a firm should introduce its green product when the spillover effects and the cost of the green product are small or the spillover effects are large enough. The firm should utilize a penetration pricing strategy for the functionally inferior green product when the environment-related utility is small or when the environment-related utility is moderate and the spillover effects are relatively small. Otherwise, the firm should adopt a skimming pricing strategy. However, the firm should adopt a penetration pricing strategy for the functionally superior green product when the spillover effects are relatively large and a skimming pricing strategy otherwise. Interestingly, the firm's total profit may decrease with the spillover effects when the spillover effects are small.

Optimal two-period pricing strategies in a dual-channel supply chain considering market change

This paper considers a dual-channel supply chain consisting of one manufacturer with an online direct channel and one offline retailer who distributes the manufacturer’s products, both of whom may adopt a Different or Same price strategy over two periods (Strategy D or S). Strategy D(S) means that the manufacturer and retailer set different(same) retail prices for online and offline channels in the two sales periods. The main purposes of this research are to identify the manufacturer’s and the retailer’s optimal two-period pricing strategy and explore how consumers’ channel preference, price competition, and market change affect the strategy equilibrium. We derive and compare the equilibrium outcomes by establishing four game models: (1) Model SS, both the manufacturer and retailer adopt Strategy S; (2) Model SD, the manufacturer chooses Strategy S while the retailer selects Strategy D; (3) Model DS, the manufacturer chooses Strategy D while the retailer selects Strategy S; (4) Model DD, both choose Strategy D. The research findings demonstrate that most prices increase as the market change rate raises, except for the first-period prices under Model DD, which remain unchanged. Under the different prices settings, a shrinking market would impel supply chain members to utilize a skimming pricing strategy, while a growing market drives them to select a penetration pricing strategy. Different from traditional wisdom, Strategy D would always benefit the manufacturer, while it may hurt the retailer and the whole supply chain under certain conditions. Accordingly, either Strategy DS or DD may be the Nash equilibrium. After considering the consumers’ channel switching behavior, the retailer has more incentive to adopt Strategy S in a shrinking market.

Price estimation based on business model pricing strategy and fuzzy logic

Pricing, as one of the most important aspects of a business, should be taken seriously. Whatever affects a company's pricing system tends to affect its profits and losses as wall. Currently, many manufacturing companies fix product prices manually by member of an organization's management team. However, due to the imperfect nature of humans, an extremely low or high price may be fixed, which is detrimental to the company in either case. This paper proposes the developement of a fuzzy-based price expert system (Expert Fuzzy Price (EFP)) for manufacturing companies. This system will be able to recommend appropriate prices for products in manufacturing companies based on four major pricing strategic goals, namely : Product Demand, Price Skimming, Competition Price, and Target population.

Pricing and lot-sizing decisions on buy-now-and-pay-later installments through a product life cycle

Buy-Now-Pay-Later (BNPL) service is one of the fastest-growing segments of financial technology in 2021. The BNPL program is a type of short-term finance that allows consumers to make purchases and pay for them interest-free over a predetermined brief period of time, usually weeks or months. In general, BNPL payment is instant-approval and no-credit-check right at checkout. As a result, BNPL payment is appealing to young adults who have existing student loans and cannot access credit. In this paper, we develop a brand-new model interfaced with finance, marketing, and operations in which a young store owner orders a product, receives a BNPL program at checkout with a good-faith down payment, and then pays off the remainder in interest-free installments. The store owner sells the product to consumers with price- and timing-dependent demand. The objective for the store owner is to determine an optimal selling price and replenishment time simultaneously to maximize total profit. We then derive the optimal solution and characterize its properties based on theoretical results. Furthermore, we present three examples and find that the optimal price moving through its life cycle coincides with price skimming. Finally, we perform a sensitivity analysis to gain managerial insights. For instance, an increase in fraction of installments or initial demand significantly raises total profit and order quantity meanwhile tremendously reduces selling price and cycle time. Also, an increase in demand slope or return rate on investment compels the store owner substantially to increase the unit price, cycle time, order quantity, and total profit.

Price skimming: Commitment and delay in bargaining with outside option

This paper studies a bargaining problem in which the buyer's valuation and outside option are private information. We show that there exists a non-stationary equilibrium in which the seller can secure full commitment profit (from the optimal sales mechanism that exhibits price skimming) if and only if the buyer's outside option takes a zero value with positive probability (non-negligibly zero outside option). Our innovation is to show that (i) both the Coasean reversion and positive selection are necessary for the seller to secure the full commitment profit and (ii) the Coasean equilibria may coexist with positive selection despite their claimed incompatibility if the non-negligibly zero outside option exists.

Pricing of crowdfunding products with strategic consumers and online reviews

Entrepreneurs can adopt a two-stage sale to sell the product once the crowdfunding campaign succeeds. With All-or-Nothing mechanism, we investigate the effect of online reviews on strategic consumer behavior and the choice of pricing strategy by considering two cases—one without and the other with online reviews. Analytical results show that online reviews play a significant role in determining the pricing strategy and maximizing profits. In the absence of online reviews, regardless of the funding goal, the penetration and uniform pricing strategies always benefits entrepreneurs. However, in the presence of online reviews, the funding goal influences the optimal pricing strategy. In particular, when the funding goal is low, the penetration pricing strategy is preferred; while the skimming pricing strategy may be adopted under certain conditions. By analyzing the model extension, we find that the presence of regret cost is beneficial to the entrepreneur’s profit under most circumstances.

Short-term or long-term cooperation between retailer and MCN? New launched products sales strategies in live streaming e-commerce

Nowadays, live streaming e-commerce has become popular all over the world. In this paper, we study the pricing strategy of new products when they are launched in live streaming considering the consumer uncertainty and network externalities. We characterize the impact of live streaming into two dimensions, emotional support and information support, and investigate how those two dimensions impact the choice of cooperation types and the revenue distribution between the retailer and MCN (Multi-Channel Network). Using a two-stage vertical model, we find that, with the low consumer uncertainty, the MCN induces the retailer to choose the cooperation type depending on the emotional support level, but with the high consumer uncertainty, it depends on the information support level. For new-product pricing strategy, whether to adopt the penetration pricing strategy or the skimming pricing strategy depends on the impact of live streaming, the consumer uncertainty and network externalities. Interestingly, the commission price does not increase with the consumer uncertainty. An important implication for the retailer is that, reducing consumer uncertainty may not be beneficial to the total profit.

Consumer Purchasing decision: Choosing the Marketing Strategy to influence consumer decision making

The purpose of this study was to investigate the role that marketing strategy plays as a determining element in the decision-making process of consumers. The current study made use of the quantitative research approach by customizing a questionnaire based on information gleaned from academic sources. This particular study had a sample size of 162 participants, all of whom were selected at random throughout the selection process. According to the findings, penetration pricing exerts a substantial and beneficial impact on the decision-making process of consumers at the 5% level. According to the findings, price skimming has a substantial and favorable effect on the decision-making process of consumers at the 5% level. According to the findings, marketing sharing websites have a considerable beneficial impact on the decision-making process of consumers at the 5% level. The findings indicate that blogs have a considerable and beneficial effect on the decision-making process of consumers at the 5% level. According to the findings, competitive pricing has a substantial and favorable impact on the choice-making process of consumers at the 5% level. Furthermore, every beta value exceeds the.001 threshold. All of the models have extremely high adjusted R2, which indicates that the models are very capable of explaining the variance in consumer decision-making that is caused by the variation in the independent variables. The F-value demonstrates that the explanatory variables are jointly statistically significant in the model, and the Durbin-Watson (DW) statistics demonstrate that there is autocorrelation in the models. Both of these findings are supported by the model's positive autocorrelation.

Penetration or Skimming? Pricing Strategies for Software Platforms Considering Asymmetric Cross-Side Network Effects

Considering a two-sided software platform with software developers on one side and software users on the other, we study whether the platform should adopt a penetration pricing strategy or skimming pricing strategy on the developer side. We propose a two-period analytical model with asymmetric cross-side network effects to analyze the platform’s optimal pricing strategy. Our analysis reveals that the platform should adopt a penetration pricing strategy if the user-to-developer network effect is strong and a skimming pricing strategy otherwise. If the platform does not charge users an access fee, the platform should consider subsidizing developers’ access in the first period only. However, when the platform charges users an access fee, subsidizing developers’ access in both periods can be viable for the platform. Charging the software user an access fee incentivizes the platform to subsidize developers in the first period if the user-to-developer network effect is weak. Finally, this study reveals that the optimal access fee charged or subsidy provided to developers in the two periods is determined by several key factors: developers’ basic expectations about the revenue to be gained from the platform (optimistic or pessimistic), intensities of cross-side network effects, the lengths of the two periods, and the access fee charged to users.

Optimal pricing and remanufacturing entry strategies of manufacturers in the presence of online reviews

In recent years, online reviews are increasingly getting more concerns by firms and consumers because they can help mitigate consumers’ uncertainty on product quality and experienced attributes and significantly affect firms’ operational decisions. We in this study attempt to examine the remanufacturing entry and pricing strategies of manufacturers in the presence of online reviews. We consider an original equipment manufacturer (OEM) selling a new product over two periods in online retailing and determine whether and when to adopt a remanufacturing entry strategy in the market. We uncover online reviews’ quality-dimensional effect and experienced dimensional effect that jointly determine the OEM’s pricing and remanufacturing strategies. We show that in the presence of online reviews, the OEM will cautiously determine whether to adopt the first-period remanufacturing entry strategy and may also adopt the second-period remanufacturing entry strategy under certain conditions. Interestingly, the OEM will adopt the penetration pricing strategy for the new product and the remanufactured product (if available) when the actual product quality is sufficiently high, but the skimming pricing strategy otherwise, which is different from the uniform pricing strategy in the absence of online reviews. Our results also show that online reviews significantly affect the OEM’s profit and consumer surplus. In particular, when the actual product quality is high enough, the OEM and consumers will attain the “win–win” situation.

Pricing policies of a dynamic green supply chain with strategies of retail service

PurposeThe paper investigates firms' optimal pricing policies and green strategies in a dynamic green supply chain with consideration of different retail service strategies. The purpose of the paper is to address the following research questions: (1) What are the optimal pricing policies and green strategies of the dynamic decentralized supply chain with the competitive or supportive retail service? (2) How does the dynamic consumer's perception of green product affect these equilibrium solutions?Design/methodology/approachThe paper establishes the dynamic game models and then derives a firm's instantaneous and steady-state feedback equilibrium solutions in three scenarios as follows: (1) the integrated supply chain; (2) the decentralized supply chain with competitive retail service and (3) the decentralized supply chain with supportive retail service. Finally, we conduct numerical analyses to compare the firm's instantaneous and steady-state equilibrium solutions and profit in the three scenarios.FindingsThe theoretical and numerical analysis results suggest that the supportive retail service is less inefficient than the competitive retail service in the decentralized supply chain and that the types of retail service have no influence on the green strategy. Moreover, a firm's myopia leads to lowering the greenness degree, retail service level and severe price competition, resulting in economic losses. Consumers’ initial perception of greenness degree determines whether the retailer should adopt the skimming pricing strategy or penetration pricing strategy. Furthermore, only when consumers’ perception of greenness degree is higher than a threshold, will the manufacturer produce green product with positive greenness degree.Originality/valueThis is one of few studies on the effect of different types of retail service on horizontal competition in green supply chain. The extension of the static study by adopting differential game approaches provides researchers with a deeper understanding of the application of retail service in green supply chain.

STRATEGIC PRICING PRACTICES AND MARKETING PERFORMANCE OF BREWERIES IN SOUTH-SOUTH NIGERIA

The purpose of this study was to examine the effect of strategic pricing/pricing strategies on the marketing financial performance of Beverage firms in South-southern Nigeria. The area of study is Rivers state, while five firms were selected based on convenience. A sample size of 201 respondents was employed. The study employed dimensions of pricing strategy such as; Price skimming, Penetration pricing and Price discrimination and measures such as customer satisfaction. The correlational analysis was employed and indicated that there was a statistically significant and positive relationship between pricing strategies and marketing performance. These results implied that economy pricing has a positive effect on the marketing performance of beverage companies. The study recommends that; Beverage firms should put in place measures to reduce product costs and thus increase marketing performance whenever such a strategy is used. Also, these firms should also adopt ways to implement their pricing strategies better compared to competitor firms. They should undertake market survey when formulating prices for their services. They should identify the prices charged by their competitors in order to come up with prices which are nether too low or very high.

Marketing Strategy: Pricing strategies and its influence on consumer purchasing decision

The current study aimed to examine pricing strategies as a determining factor in influencing consumer behavior. The present research applied quantitative research method via adapting questionnaire from academic sources. The sample size for the current study is 162 which gathered via random sampling method. The results show that Penetration Pricing has significant positive influence on consumer behavior at 5% level. The results show that Price Skimming has significant positive influence on consumer behavior at 5% level. The results show that marketing sharing sites has significant positive influence on consumer behavior at 5% level. The results show that blog has significant positive influence on consumer behavior at 5% level. The results show that Competitive Pricing has significant positive influence on consumer behavior at 5% level. Moreover, all beta value is higher than .001. All models have very high adjusted R2 indicating the ability of the models explaining the variation of consumer behavior due to variation of independent variables is very high. The F-value shows that the explanatory variables are jointly statistically significant in the model and the Durbin-Watson (DW) statistics reveals that there is autocorrelation in the models.

Presale Strategy for a Dual-Channel Retailer Considering Sales Effort

We study the presale strategy and decision-making problems for a retailer selling products. Based on the penetration and skimming pricing strategies, we consider the characteristics of consumer market segmentation and valuation heterogeneity, focus on the implementation conditions and optimal decision results of different pricing strategies before and after the introduction of an online presale channel, and conduct a multidimensional comparative study on the impact of the introduction of the online presale channel. We find that the introduction of an online presale channel can always improve the retailer’s profitability, but its pricing strategy and sales effort should be adjusted to align with the consumer market segmentation. When the proportion of online consumers is high or their preference for the spot channel is high, the retailer should always adopt a penetration pricing strategy. If online consumers also show a high consumption preference for the presale channel, the retailer should reduce its sales effort to save costs after introducing the presale channel; otherwise, the retailer should increase its sales effort to increase demand in the offline spot channel. When the proportion of online consumers is low and their preference for the spot channel is low, the retailer should always adopt a skimming pricing strategy and keep sales effort unchanged. When the proportion of online consumers and their consumption preference for the spot channel are moderate, the retailer should adjust its pricing strategy from penetration to skimming after introducing the online presale channel and appropriately reduce the level of sales effort.