Research On Product Line Pricing With Consumer Perceived Quality

With lots of individual consumers'demands emerging, manufacturers offering single product can no longer meet their needs now. They have to provide a line of products, which is called a product line, that satisfies similar functionalities or serve similar needs and wants of consumers if they want to win in the market. However, the interdependency and the so-call cannibalization between the products within one line have cause manufacturers a big problem. While many researchers have been working on the product line pricing issue, the effect of price on perceived quality is frequently ignored.This thesis conducted a research on the product line pricing strategy with perceived quality of the product influenced by its price. After the existing research related to product line pricing and perceived quality being introduced in chapter 2, the demand function, based on the classical assumptions, of products in a vertical product line whose length is two was reached, and the condition in which product lines would be offered as well as the demand and demand function when product lines is offered were gotten. And then, the product line pricing strategy of that product was put forward. After that, following some of the assumptions used in chapter 3, the perceived quality-price function was constructed in the restriction of some properties. Then the demand function and the optimal price in this case were reached, with deep discussions on the effect of the perceived quality-price relationship on the manufacturers. Then in chapter 5, the model maximizing the manufacturers'profit in the price-perceived quality set was built, with numerical analysis followed.During the modeling and analyzing process, it was found that the consumers with the highest reservation price of unique quality were in the group who first give up purchasing. What's more, if the price-effect on perceived quality is large enough, the manufacturers will be force to raise the price while reducing his profit. However, things will be different when product line is provided. In some conditions, the manufacturers can positively react to the negative effects brought by the price-perceived quality relationship by just raising the price of the high-quality product and meanwhile reducing the price of the low-quality product. When doing so, the manufacturers'optimal prices can not only offset the negative effect mentioned above, but also bring more profit to the manufacturers. This thesis is an extension of the product line pricing research in the?theoretical side, and can offer some guides to the manufacturers in trouble with pricing the product line in the practical side.