Régis Chenavaz

Dynamic pricing, product and process innovation

The question of simultaneous dynamic pricing, product and process investment policies is crucial for manufacturing and high-tech industries. This paper models these policies in an optimal control setting. On the supply side, the firm sets prices, product and process investment levels over time. On the demand side, current demand depends on price and quality. Under an additive separable demand function, dynamic pricing increases with quality and cost. Therefore, both product innovation and process innovation impact the pricing policy. Under a multiplicative separable demand function, dynamic pricing policy follows the dynamic of production cost and is independent of the evolution of product quality. Thus, process innovation is the main determinant of a firm’s pricing policy over time and product innovation has no impact.

Sellers' and Buyers' Reference Point Dynamics in the Housing Market

Building on behavioural research in economics, this paper examines reference points for sellers and for buyers in the housing market. Using experimental data, it is shown that, contrary to standard economic theory predictions, reference point dynamics can be influenced by market evolution and available information. More precisely, is it shown that the reference point depends on the seller/buyer role in the housing market, that past prices influence the reference point and that the reference point can be manipulated by information disclosure. The results are consistent with the theoretical implications of prospect theory and mental accounting.

Consumers’ perceived risk and hold and use of payment instruments

ABSTRACT Consumer decisions regarding retail payment instruments entail private and social costs. Due to these social costs, policymakers are increasingly trying to understand the determinants of consumer payment choices as documented by the European Central Bank’s regular publications. This article contributes to this understanding by investigating the role of perceived risk. Based on an original survey of French consumers, we measure the effects of perceived risk on the decisions to hold and use the main retail payment instruments: cash, card and cheque. We point to the sequential dependence of the decisions to hold and use a payment instrument, and study jointly both decisions. The bivariate analysis based on risk factors shows that unavailability risk and time risk have the greatest transverse influence on holding and using payment instruments. Our results, robust to controlling for consumer characteristics, confirm their propensity for a quick-to-use and constantly available payment instrument. We discuss the relevance of our results for policy making purposes.

Dynamic Pricing in Management Science

This paper presents a review of the literature on dynamic pricing models in management science. We discuss monopolistic and competitive situations, with an emphasis on applications in different contexts. We also describe the main development perspectives of this literature.

Dynamic quality policies with reference quality effects

ABSTRACT Dynamic pricing policies with reference-price demand have been intensely analysed. Less studied are dynamic quality policies with reference-quality demand. This article studies the dynamic quality policy of a firm whose consumers use a reference point in their decision-making, in line with the principles of behavioural economics. More specifically, I consider reference quality formation in an optimal control setting. By solving on the basis of Pontryagin’s maximum principle, I obtain analytical solutions to the optimal quality policy. The managerial implications of quality reference for dynamic quality policy are discussed.

An analytical model of the relationship between product quality and advertising

Abstract The existing literature debates if the products of better quality are more heavily advertised. This article resolves this contradiction by answering the question of when better quality leads to more advertising. It provides a novel articulation of prior empirical research, modeling the advertising-quality relationship in an optimal control setting. On the supply-side, a firm carries out advertising to promote its product and product innovation policies that improves product quality. On the demand-side, consumers are sensitive to product price, product quality, and advertising expenditure. The paper identifies the conditions that will dictate when the advertising-quality relationship will be positive or negative. The argument is that advertising increases with quality (i.e., positive relationships) if the demand effects (quality and advertising effects on demand) outweigh the supply effect (quality effect on cost). Alternatively, advertising decreases with quality (i.e., negative relationships) if the demand effects are lower than the supply effect. Consequently, despite consumer awareness of quality, a firm may advertise a product of lower quality more to maximize profit.

Population distribution, effective area and economic growth

The usual measure for the factor land is the total area. But total area is a flawed measure because land is of unequal quality. To account for land quality, we use an alternative measure called effective area. Effective area is based on spatial population distribution which captures both natural conditions and human activity. Theoretically, effective area explains economic growth better than total area that biases the measure of total factor productivity (TFP) growth. Empirically on the basis of 40 years of panel data for the United States, an increase of 10% in effective area is associated with an economic growth of 5%, and the omission of effective area undervalues the growth of TFP by 8.1%.