Options as a Marketing Tool: Pricing a Promotional Scheme for a Product with a Secondary Market. (11th May 2015)

• Record Type: Journal Article
• Authors: Afik, Zvika; Lowengart, Oded; Yosef, Rami
• Is Part Of: Managerial and decision economics. Volume 38:Number 1(2017)
• Page Start: 19
• Page End: 36
• Publication Date: 2015-05-11
• Subjects: Managerial economics -- Periodicals; Decision making -- Periodicals; Management -- Periodicals; 658.15
• DOI: 10.1002/mde.2736
• Languages: English
• ISSNs: 0143-6570

Abstract

Abstract : Adding options to durable products allows new opportunities for manufacturers and retailers in markets with a secondary market to create better segmentation schemes, provide creative means to differentiate their products and services, and increase the value they offer consumers. This raises the need for sellers to properly price such options. This work presents a few examples of incentive programs for the car industry, develops models and calculates their cost to the seller, demonstrating the applicability of the proposed methodology. Our numerical results indicate that such options are surprisingly inexpensive for car manufacturers and dealers. Copyright © 2015 John Wiley & Sons, Ltd.