A price discrimination modeling using geometric programming

Abstract

This paper presents a price discrimination model which determines the product's selling price and marketing expenditure in two markets. We assume production as a function of price and marketing cost in two states. The cost of production is also assumed to be a function of production in both markets. We propose a Multi Objective Decision Making (MODM) method called Lexicograph Approach (LA) in order to find an efficient solution between two objectives for each market. Geometric Programming is used to solve the resulted model. In our GP implementation, we use a transformed dual problem in order to reduce the model to an optimization of a nonlinear concave function subject to some linear constraints and solved the resulted model using a simple grid line search. © Springer-Verlag Berlin Heidelberg 2006.