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| Author: | Gallini, N. Karp, L. |
| Title: | Sales and consumer lock-in. |
| Journal: | Economica
1989 : AUG, VOL. 56:223, p. 279-294 |
| Index terms: | PRICING NEW PRODUCTS CONSUMER BEHAVIOUR |
| Language: | eng |
| Abstract: | The dynamically consistent price path is examined for a new product monopolist, unable to commit to future prices, when consumers must incur setup costs of adopting the product. Setup costs are found to induce a price path with introductory sales. The path is characterized by periods of high prices, during which only captive customers buy the product, and periods of low sales prices, during which new customers adopt the product. When the stock of captive customers gets large, a final sale takes place. As the stock increases, sales occur less frequently. Finally, a new product monopolist may hold a sleeping patent; that is, he may postpone sales of the product to avoid locking into a high-pricing strategy that ignores new customers. |
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