Optimum pricing policy for dunamic markets. Part I: Monopoly case

In this paper we study the effect of dynamic behavior of the market on the optimum pricing policy for a revenue maximizing firm in a monopoly market. We show that the optimum pricing policy in the dynamic market can be very different from the static one, and the most important contributing factors for this difference are: consumer response time, planning period and the discount rate. Furthermore we show that for the linear model that we use, in the limit of infinite planning horizon or market equilibrium the optimum price for the dynamic market reduces to the optimum price for the static market.