The optimal pricing strategy of the novelty product determined by function of price elasticity of demand

Abstract

The article considers approaches to determining the price elasticity of demand as a regression model of price dependence, and also the risks in pricing based on the models obtained. The process of obtaining price elasticity of demand as a regression model of price dependence is proposed to be performed in two stages. At the first stage, based on empirical information on prices for innovative products and sales volumes, models of demand-price dependency are obtained. At the second stage, based on the definition of elasticity by the methods of limit analysis, regression models are obtained for the price elasticity of demand versus price. The application of the proposed methodology is demonstrated in determining the optimal price for Smart House systems for an enterprise that plans to enter with them to the market of the city Odessa.