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In this article, we investigate the dynamic control problems of a price-regulated monopolist's product innovation (improving product quality) and process innovation (reducing marginal production cost) in a market exhibiting network externality. Our work significant features are: (ⅰ) the price of the product is regulated, which is set by a regulator, who links price level to the product quality; (ⅱ) extending the research on product and process innovation by considering reference quality in which reference quality is a dynamic variable; (ⅲ) the consumers' demand function depends on product price, product quality, and reference quality; and (ⅳ) the network size is proportional to consumers' demand. Our main results show that: (ⅰ) under monopoly and social planning, there exists a unique saddle-point steady-state equilibrium, respectively; (ⅱ) in the neighbourhoods of steady-state equilibrium, the social incentive towards both the investments in product and process innovation is always larger than the private incentive characterising the profit-seeking monopolist; (ⅲ) although the price is regulated, the price is higher under social planning than that under monopoly; (ⅳ) the monopolist undersupplies product quality as compared to the social planning, while marginal production cost is socially efficient. [ABSTRACT FROM AUTHOR]

In this paper, we formulated a dynamic game model of the firms' process innovation with technological spillover under different market structures (market competition intensity) in a duopoly market, in which the firms are concerned about relative profits as well as their own profits and investigated the relationship between the degree of competitiveness faced by the firms and their R&D expenditure. Our results showed that, under certain conditions, the system always admits saddle point steady-state equilibrium under independent ventures and R&D cartel games, respectively, and although the process innovation investment under R&D cartel is higher than that under the independent ventures, whether the marginal production cost under R&D cartel is less (higher) than that under the independent ventures depends on the degree of technological R&D spillover and the market competition intensity. Furthermore, the marginal production cost under independent ventures is not monotonically decreasing with spillover for the given region of market competition intensity; while the marginal production cost under R&D cartel game always monotonically decreases with spillover for any market competition intensity. [ABSTRACT FROM AUTHOR]

In this article, we construct a dynamic optimal control model where the price and R & D portfolio are simultaneously determined by a monopolist with the consumers' reference effect about product quality. We extend the conventional model by describing the product and process R & D with non-linear dynamic equations and considering the signal effect of price on the change rate of reference quality. Our analysis mainly suggests that: (i) the non-linear system admits at most two steady-state saddle-point equilibria under both monopoly and social planning; (ii) the product price is increasing (decreasing) in the effort for quality improvement in the beginning (ending) period of the time horizon, while the price is always decreasing in the effort for marginal production cost reduction; (iii) in the neighbourhood of consumers' memory parameter, the two dimensions of R & D portfolio are substitutes (complements) if and only if the signal effect of the price is strong (weak); (iv) the change rates of the efforts in product and process R & D are increasing (decreasing) in memory parameter if and only if the signal effect of the price is below (above) some threshold; (v) by examining the extreme case of key parameters, we find that the system cannot converge to the steady-state equilibrium when consumers' adjustment speed about reference quality is low under both monopoly and social planning. [ABSTRACT FROM AUTHOR]

In this paper, a firm's research and development (R & D) investments for abatement technology innovation is modeled as a non-cooperative two-stage game. Parameters are introduced to simulate the spillover effects and market structure. Our advanced analysis together with numerical experiments reveals that (i) as the market structure becomes more competitive, the firm's investments for abatement technology innovation under non-cooperative setting is more likely to be preferred to the investments for abatement technology innovation under cooperative setting; (ii) for a given emission tax, the firm's investments for abatement technology innovation increase with the increase of the spillovers, while the investments for abatement technology innovation decrease with the increase of the competition intensity; (iii) for a given emission tax, the optimal solution of the firm's investments for abatement technology innovation is stable for both non-cooperative and cooperative cases. [ABSTRACT FROM AUTHOR]

This paper develops a dynamic model to study a firm's product and process innovation with expected quality effects in a monopoly exhibiting network externality. The significant features of our work are: (i) considering the customers' expected quality effects in a monopoly exhibiting network externality; (ii) the demand structure depends on price, product quality, and expected quality; and (iii) discussing a special case where the network size is proportional to the demand. Our results show: (i) there exists a unique saddle-point steady-state equilibrium under monopoly and social planning; (ii) as the forgetting parameter increases, the effort of process innovation is greater than that of product innovation; (iii) the social incentive towards both efforts is always larger than the private (monopolist) incentive; however, when the network size is proportional to demand, the social incentive towards the effort in product innovation (process innovation) is always smaller (larger) than the private (monopolist) incentive; (iv) sensitivity analysis shows that the both efforts and price are more sensitive towards the unit variable strength of network externality than the fixed strength of network externality, while the forgetting parameter has little effect on the both efforts and price; (v) the effort in product (process) innovation is increasing (decreasing) with the proportional coefficient. [ABSTRACT FROM AUTHOR]

In this paper, we present an optimal control model of a stochastic production–inventory with deteriorating items, emission tax and pollution abatement investment. In our model, the emission tax is levied on the firm’s environmental obsolescence rate of technology rather than the total amount of the environmental externality. Our objective is to apply Hamilton–Jacobi–Bellman (HJB) equation to solve the stochastic production–inventory system with deteriorating items, emission tax and pollution abatement investment; and derive the optimal production rate and pollution abatement investment rate that maximise the objective function value. The results are discussed with some illustrative examples for different demand rate functions, and sensitivity analysis is conducted to study the effect of changing the parameters and coefficients on the objective function value. [ABSTRACT FROM PUBLISHER]

It is widely acknowledged today that the control and maintenance of production inventories of deteriorating items have attracted much attention in inventory analysis because most physical goods deteriorate over time. In 2012, Bukhari and El-Gohary modelled an optimal control model of production-maintenance system with deteriorating items, and derived the optimal scheduled production rate and preventive maintenance rate. In this paper, we propose an alternative emission tax policy design, and extend the model of Bukhari and El-Goharys to an even more general model in which the emission tax and pollution R&D investment are taken into account. Our aim is to apply optimal control theory to solve the production-maintenance problem with deteriorating items, emission tax and pollution R&D investment; and derive the optimal schedule production rate, preventive maintenance rate and pollution R&D investment rate that minimise the total cost. The results are discussed with some illustrative examples for different demand rate and obsolescence rate of process performance in the absence of maintenance, and sensitivity analysis is conducted to study the effect of changing the parameters and coefficients on the objective function value. [ABSTRACT FROM AUTHOR]

This article analyses the price-quality and price-goodwill relationships under the influence of quality on goodwill through the effects of cost, sales, and mark-up. We identify the conditions under which a negative price-quality or price-goodwill relationship will arise, that is, price falls as quality or goodwill increases over time. We show that the price-quality or price-goodwill relationship could be negative even if the demand function is linearly additive, and this relationship will tend to be positive when the customer demand becomes more sensitive to the product quality. [ABSTRACT FROM AUTHOR]

Using the well-known Arrow and Karlin (1958) dynamic production–inventory model and the model with tradable emission permits which was presented by Dobos (2005, 2007), we develop a model of the production–inventory system with deteriorating items and tradable emission permits. The objective of this paper is to apply the optimal control theory to solve the production–inventory problem with deteriorating items and tradable emission permits, and derive the optimal inventory level and the optimal production rate that minimise the total cost. The results are discussed with a numerical example and a sensitivity analysis of the optimal solution with respect to the parameters of the production–inventory system is carried out. [ABSTRACT FROM AUTHOR]