Pricing and Investment Decision Issues of an Automobile Manufacturer for Different Types of Vehicles

Abstract

With the raise of consumers' environmental awareness, automobile manufacturers try to add production lines of new energy vehicles. This paper deals with pricing and investment decision issues of an automobile manufacturer for different types of cars. The consumers' purchase preference for the new energy vehicle is formulated as a function of the manufacturer's investment on facility and advertisement. Aiming to maximize the total profit of the manufacturer, we construct a decision model. By solving a differential equation, a necessary condition is proposed for guaranteeing that the manufacturer produces and sells both of the two types of vehicles. It is shown that both the consumers' preference and the carbon tax affect the decisions of the manufacturer. For the possible scenarios in which the manufacturer only sells one kind of product, we present two simplified models. By comparing different achieved solutions, the optimal decision strategy is achieved. Finally, we show a numerical illustration to examine different decisions of the manufacturer under different sensitivity coefficients with regard to the investment. The main contribution of this paper is providing a jointly pricing and investment decision model under changeable consumers' purchase preference, and revealing the influence factors of the automobile manufacturer's transformation.