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.
- Optimal control
- Product planning
ASJC Scopus subject areas
- Computer Science(all)
- Modeling and Simulation
- Management Science and Operations Research
- Information Systems and Management