Optimal introductory pricing as an investment decision

In this article, we propose a model that can be used to calculate the optimal introductory price for any product or service offered in a market. We view the introductory pricing problem as an investment decision with uncertain future cash flows. In this setup, the initial investment is the foregone income of lower period 1 revenues to generate higher expected cash flows from subsequent periods. We empirically test the model using data from a survey in the alpine skiing industry and show that it provides meaningful results.