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Quality and the diffusion of innovations

✍ Scribed by Fouad El Ouardighi; Charles S. Tapiero

Publisher
Elsevier Science
Year
1998
Tongue
English
Weight
601 KB
Volume
106
Category
Article
ISSN
0377-2217

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✦ Synopsis

In this paper, we solve the problem of optimal control of products diffusion by quality in a context of monopolistic competition. To do so, we introduce a dynamic demand function leaning on two hypotheses: first, price acts a signal of quality; second, demand is more sensitive to quality than to price. Using the maximum principle of Pontryagin, we then characterize the optimal dynamic trajectory of quality and its qualitative properties.

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