A Friction Model for Describing and Forecasting Price Changes

Marketing Science Vol. 6, No. 4, pp. 299-319, Fall 1987

21 Pages Posted: 27 May 2016

See all articles by Wayne S. DeSarbo

Wayne S. DeSarbo

Pennsylvania State University

Vithala R. Rao

Cornell University - Samuel Curtis Johnson Graduate School of Management

Joel Steckel

New York University (NYU) - Department of Marketing

Yoram Jerry Wind

University of Pennsylvania - Marketing Department

Richard Colombo

New York University (NYU)

Date Written: November 1, 1987

Abstract

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.

Keywords: friction model, price changes, price reaction, description, forecasting

Suggested Citation

DeSarbo, Wayne S. and Rao, Vithala R. and Steckel, Joel and Wind, Yoram Jerry and Colombo, Richard, A Friction Model for Describing and Forecasting Price Changes (November 1, 1987). Marketing Science Vol. 6, No. 4, pp. 299-319, Fall 1987. Available at SSRN: https://ssrn.com/abstract=2784862

Wayne S. DeSarbo (Contact Author)

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

Vithala R. Rao

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

Joel Steckel

New York University (NYU) - Department of Marketing ( email )

Tisch Hall
40 W 4 St.
New York, NY 10012
United States
2129980521 (Phone)

Yoram Jerry Wind

University of Pennsylvania - Marketing Department ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States

Richard Colombo

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

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