DeSarbo, Wayne S.; Rao, Vithala R.; Steckel, Joel H.; Wind, Jerry; Colombo, Richard
September 1987
Marketing Science;Fall87, Vol. 6 Issue 4, p299
Academic Journal
This paper presents a new friction model for describing the price changes of a product or brand over time and for forecasting both the timing and magnitude of such changes from one period to the next. After a review of the related pricing literature, we present our model and a modified controlled random search procedure for estimating its parameters. The model is applied to describe and forecast the weekly mortgage interest rates for a local bank in the Philadelphia area. Finally, limitations and several potential applications of this methodology are discussed.


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