Title
Numerical solution of a conspicuous consumption model with constant control delay
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
Oxford ,
Subject
Computer. Automation
Source (journal)
Automatica / International Federation of Automatic Control. - Oxford
Volume/pages
47(2011) :9 , p. 1868-1877
ISSN
0005-1098
ISI
000294877400003
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
We derive optimal pricing strategies for conspicuous consumption products in periods of recession. To that end, we formulate and investigate a two-stage economic optimal control problem that takes uncertainty of the recession period length and delay effects of the pricing strategy into account. This non-standard optimal control problem is difficult to solve analytically, and solutions depend on the variable model parameters. Therefore, we use a numerical result-driven approach. We propose a structure-exploiting direct method for optimal control to solve this challenging optimization problem. In particular, we discretize the uncertainties in the model formulation by using scenario trees and target the control delays by introduction of slack control functions. Numerical results illustrate the validity of our approach and show the impact of uncertainties and delay effects on optimal economic strategies. During the recession, delayed optimal prices are higher than the non-delayed ones. In the normal economic period, however, this effect is reversed and optimal prices with a delayed impact are smaller compared to the non-delayed case.
Full text (open access)
https://repository.uantwerpen.be/docman/irua/062eb1/5e30a5cf.pdf
E-info
http://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000294877400003&DestLinkType=RelatedRecords&DestApp=ALL_WOS&UsrCustomerID=ef845e08c439e550330acc77c7d2d848
http://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000294877400003&DestLinkType=FullRecord&DestApp=ALL_WOS&UsrCustomerID=ef845e08c439e550330acc77c7d2d848
http://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000294877400003&DestLinkType=CitingArticles&DestApp=ALL_WOS&UsrCustomerID=ef845e08c439e550330acc77c7d2d848
Handle