Constraint profit optimization in pricing an established national brand in the presence of a local generic.
Western Connecticut State University
In my talk, I will describe our model for pricing an established national brand in the presence of a local generic. We utilize multivariable calculus and regression techniques to solve the two-component problem: The analytical and the empirical models. The analytical one entails nonlinear optimization with equality constraints, which we show can be solved by the method of Lagrange multipliers. The model's complication depends on the form of the demand function assumed and the precise industry structure. The empirical model is based on regression (method of least squares) and requires specific market data. An interesting problem for future research that derives from the one we have considered is its game-theoretic version.
The way I will present the problem and its solution allows undergraduate students who know at least the notion of derivative for a function of one variable, and perhaps the notion of vector, to follow my talk.