TY - JOUR
T1 - Optimal investments in market research
AU - Venezia, Itzhak
PY - 1984/11
Y1 - 1984/11
N2 - In this paper a method is presented for determining when a monopolist should perform market research, assuming that the market research improves the estimates of the parameters of the demand function which the monopolist faces. Applications of the method to several kinds of marketing research activities are also discussed. It is shown that if the intercept of a linear demand is the parameter estimated by the market research, then this activity will be periodical, i.e., it will be performed at certain intervals regardless of the prices and quantities observed. However, if the slope of the demand is the parameter estimated, then the decision whether to engage in market research will depend on the observed prices (but not necessarily on the observed quantities). We also show that in this case even without ever performing market research, the variances of the estimates of the above-mentioned parameters are bounded and converge to some steady-state limit. Thus the potential gains from market research may be limited.
AB - In this paper a method is presented for determining when a monopolist should perform market research, assuming that the market research improves the estimates of the parameters of the demand function which the monopolist faces. Applications of the method to several kinds of marketing research activities are also discussed. It is shown that if the intercept of a linear demand is the parameter estimated by the market research, then this activity will be periodical, i.e., it will be performed at certain intervals regardless of the prices and quantities observed. However, if the slope of the demand is the parameter estimated, then the decision whether to engage in market research will depend on the observed prices (but not necessarily on the observed quantities). We also show that in this case even without ever performing market research, the variances of the estimates of the above-mentioned parameters are bounded and converge to some steady-state limit. Thus the potential gains from market research may be limited.
KW - market research
UR - http://www.scopus.com/inward/record.url?scp=0021531987&partnerID=8YFLogxK
U2 - 10.1016/0377-2217(84)90185-1
DO - 10.1016/0377-2217(84)90185-1
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AN - SCOPUS:0021531987
SN - 0377-2217
VL - 18
SP - 198
EP - 207
JO - European Journal of Operational Research
JF - European Journal of Operational Research
IS - 2
ER -