Optimal decisions for the innovative enterprise considering brand goodwill and consumers’ quality expectation

The innovative enterprise entering a new market makes optimal decisions based on consumer behavior and market conditions. This study investigates product pricing strategy and quality strategy by considering the brand goodwill of the innovative enterprise and the consumers’ quality expectation. We mainly analyze three scenarios including the innovative product strategies with no competition, competitive pricing, and asymmetric-information case. Results show that the optimal price and quality level of the innovative product are not always positively correlated with the brand goodwill of the innovative enterprise. Moreover, to cope with a competitive market, optimal prices and production strategies are proposed. Faced with consumers insensitive to quality bias, the innovative enterprise with low brand goodwill can hardly gain an advantage in quality strategy. In a Bertrand competitive market, the optimal price and corresponding production strategy of an innovative product are somewhat different from that in a Stackelberg game market. In addition, information transparency is key to the success or failure of an innovative enterprise in a competitive market.