Title: Consumer's optimal policies for purchasing durable goods

Authors: Junxiu Jia, Rong Du, Qiying Hu

Addresses: School of Economics and Management, Xidian University Xi'an, Shaanxi 710071, China. ' School of Economics and Management, Xidian University Xi'an, Shaanxi 710071, China. ' School of Management, Fudan University, Shanghai 200433, China

Abstract: With a new durable good appearing, the price of old model tends to decrease and the performance of the new one tends to be improved. Thus, a consumer who has purchasing desire could make decision of buying a new one or the old one. The purchasing problem is presented as a Discrete Time Markov Decision Process (DTMDP) model with consumer reserve prices to different durable generations as the states, and the objective is to maximise consumer|s purchasing value. Then, a modified MDP model and several assumptions are given. With a new concept of perceived coefficient introduced, purchasing value reward in a stage could be described by durables| physical and perceived values. It is shown that the optimal purchasing points exist in a special case with two generations attracting the consumer in one stage and optimal purchasing decisions vary with the consumers| preference, which are shown with a numerical example.

Keywords: durable goods; consumer behaviour; discrete time Markov decision process; DTMDP; MDP; optimal purchase policy; perceived value; optimal purchasing decisions.

DOI: 10.1504/IJSTM.2010.032886

International Journal of Services Technology and Management, 2010 Vol.14 No.1, pp.41 - 57

Available online: 05 May 2010 *

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