Price decisions for new product with and without subsidy

The impacts of the home-appliance replacement with and without subsidy on the new product demand will affect the price decisions for new product. In this paper, considering two cases with subsidy and without subsidy, we studied the price decisions for the manufacturer and the retailer in three periods: in the first period, there is no home-appliance replacement and without the financial subsidy; in the second period, the home-appliance replacement is begun and with the financial subsidy; and in the third period, the home-appliance replacement is continued and without the financial subsidy. At the same time, we analyze the impacts of ω (the sensitivity coefficient of the consumer for the subsidy or payment) and β (the sensitivity coefficient for the retail price of the new products) on the optimal results, give the analysis of the numerical results in different cases. From our study, if ω ≤ β, the manufacturer should not offer the payment to stimulate the consumer's consumption willingness if the government stops the subsidy. But, if ω > β, in order to get more profit, the manufacturer should offer the payment to stimulate the consumer's consumption willingness even though the government stops the subsidy.