Pricing, advertising, and endogenous consideration of an "insistent" product

This paper theoretically investigates the pricing and advertising decisions of a monopolist that sells to consumers who, in each period, might consider the (cognitively costly) deci-sion to buy its product. In the proposed model, consumers can be compelled by advertising to consider the buying decision, while the likelihood of considering the decision also de-pends on past buying decisions. A product is then said to be "insistent" if not buying it (when considered) increases the likelihood of considering the buying decision in the next period, and "non-insistent" if the opposite is true. As one of several implied differences for marketing such products, it is optimal to gradually reduce prices from a relatively high en-try price when selling an insistent product, and the opposite for a non-insistent product, though both strategies should be refreshed with each advertising cycle. The model also offers a potential micro-grounded mechanism (in terms of consumers' "endogenous con-sideration") for several advertising concepts, including diminishing returns from repeated advertising, greater returns when advertising newer products, and pulsing (as an optimal strategy). (c) 2021 Elsevier B.V. All rights reserved.