An empirical model of product design and pricing strategy

An empirical model for analyzing product design and pricing strategies for a multi-product firm in a differentiated product market is developed using the ‘hedonic’ approach as a point of departure.

Abstract

Using the ‘hedonic’ approach as a point of departure, this paper develops an empirical model for analyzing product design and pricing strategies. The model focuses on a multi-product firm in a differentiated product market. It identifies criteria for optimal design and pricing for the firm's several products, given the firm's production costs, the prices and designs of competing products and given consumer tastes. The model is demonstrated with a real world application to the microcomputer industry.