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Dynamic pricing and green investments under conscious, emotional, and rational consumers

5 December 2019 at 11:30 AM - 1:00 PM

Room 205b, Campus on Viale Romania, 32

Speaker: Talat Genc, University of Guelph, Ontario

Abstract

"We consider behavioral issues in a new dynamic model in which a manufacturer (M) makes pricing and green investment decision while facing heterogeneous customers including emotional, conscious, and rational consumers. Emotional consumers base theri purchasing decisions on M's green investments. Their emotions are stochastic, dynamic, and accumulate over time. The insvestment is made over time and is subject to time-to-build so that there is a time-lag between investment and production. Differently, conscious consumers respond to both green investments and prices and have no memory on the M's past green initiatives. The rational consumers are not sensitive to environmental issues and base their decisions only on product price. We find that the most critical consumer group is emotiaonl consumers who have the largest impact on investments, prices, and profits. While M carries out costly green investmenets to satisfy emotional and green consscious consumers, it increases its profit by serving these types. Furthermore, the best environmental perfonrmance is achieved(i.e., the lowest leve of used product returns, and hence lesst landfills and lower environmental degradation) when all demand segments are satisfied."

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Talet Genc 5.12.19 (2).pdf7.32 MB