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With information asymmetry existing between the public and joint state - private enterprise , the service quality uncertainty is serious in the public projects invested by social corporation ,pricing method for the public service influence social welfare of the project and benefit of the project sponsor. Therefore , it is important for government department who management public projects how to signal quality of public products through price policy. At first , this paper builds a model of quality contingent pricing with degree of quality reaction and analyzes the existence of the optimal solution. Then, the paper studies the optimal pricing strategies for government public department and project sponsor firms when the public have different estimation of public service quality , and then discusses the impact of parameters in the model on optimal decision. There are indications that quality contingent pricing can enlarge markets portion and improve the desired benefit and social well-bing , when the public underestimate the service quality of the project sponsor . Finally we reach the conclusion about optimal price and lower price decision under given standard of service quality. These results are helpful to the decision making pricing for public department and project sponsor in public products markets.
Date of Conference: 20-22 Aug. 2010