Quality, advertising and the formation of goodwill under dynamic conditions. (English) Zbl 0624.90015
Optimal control theory and economic analysis 2, 2nd Workshop, Vienna/Austria 1984, 215-234 (1985).
[For the entire collection see Zbl 0616.00006.]
The situation considered is characterized by asymmetric information where producers produce goods of a certain quality, which can be evaluated by consumers only after purchase. Starting with a given goodwill, the objective of the producer is to maximize profits by choosing an optimal quantity, quality and advertising level of his product. Consumers’ quality expectations are endogeneous and a function of advertising and/or goodwill. The paper characterizes the optimal paths of quality, quantity, advertising and goodwill.
The situation considered is characterized by asymmetric information where producers produce goods of a certain quality, which can be evaluated by consumers only after purchase. Starting with a given goodwill, the objective of the producer is to maximize profits by choosing an optimal quantity, quality and advertising level of his product. Consumers’ quality expectations are endogeneous and a function of advertising and/or goodwill. The paper characterizes the optimal paths of quality, quantity, advertising and goodwill.
MSC:
91B62 | Economic growth models |
91B38 | Production theory, theory of the firm |
91B24 | Microeconomic theory (price theory and economic markets) |