TITLE:
The Influence of Product Market Externality on Dynamic Decisions of Monopoly
AUTHORS:
Yan Wang, Deqing Tan
KEYWORDS:
Monopolisitic Manufacturer, Market Externality, Product Price, Advertising Expenditure, Optimal Controlling
JOURNAL NAME:
Modern Economy,
Vol.8 No.6,
June
13,
2017
ABSTRACT: The externality of the goods in the market affects
the diffusion process of the product, and also affects the price strategy and advertising strategy that manufacturer makes in the diffusion process of the product. Positive externalitiy can
accelerate the speed of the product diffusion, increase product sales, and save
the cost of advertising in order to increase enterprise’s profit; Strong
negative externality reduces product sales, increases enterprise’s advertising
costs and makes losses. Under the market of the monopoly structure, considering
the effect of products’ externality, product price and advertising investment
on the product’s demand, builds the dynamic decision model of the product and
uses the control theory to get the manufacturer’s optimal price strategy and
optimal controlling strategy of the advertisement expenditure, and relatively
analysis the changing trend of optimal controlling strategy, the product’s
diffusion process and manufacturer’s profit on the different condition of
positive and negative externality, and obtains some conclusions which are
provides theory support for the decision enterprise makes.