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Dynamic Pricing and Optimal Warranty and Advertisement Policy For High-Tech Products

Ghiaie, Hamed | 2011

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 41335 (01)
  4. University: Sharif University of Technology
  5. Department: Industrial Engineering
  6. Advisor(s): Kianfar, Farhad
  7. Abstract:
  8. This study frames optimal policies for determining price , warranty length and Advertisement rate when free replacement of defective items is the business policy and the demand is dependent on price, warranty, advertisement and cumulative sales for high-tech products which have functional aspects. We apply optimal control theory to a profit-maximization model that takes into consideration the expected warranty cost per item. The maximization of market values is based upon a pre-determined life cycle and spans across both expansion and saturation phases of the market. We further investigate the optimal policies for an exponential lifetime distribution, when the demand function is set by separable and logistic growth. A solution approach using the maximization principles is described, and is applied to two specific types of markets. The first type of market includes case of static sales rate function with a zero discount rate, and the second type of market includes the case of separable sales rate function with a positive discount rate. We figured that as the growth of a product enters different phases of the market, optimal decision policies are framed by simultaneously increasing or reducing both price and warranty length and advertisement rate change is totally independent. Numerical solution is conducted to evaluate the effect of model parameters on the optimal solution. Some conclusions are drawn based on the numerical solution
  9. Keywords:
  10. Dynamic Pricing ; Advertisement ; Optimal Control ; High Technology Industries ; Optimal Warranty Policy

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