A dynamic surge pricing model throughout product lifecycle.

The shorter lifecycle and faster upgrading of the product make the potential demand change rapidly, thereby pricing based on market changes is critical to increasing profits. In response to changes in the potential demand, we present a dynamic surge pricing model that characterizes sales trajectories and gradient pricing. We introduce the Lotka–Volterra system to construct the sale-forecast system and prove its effectiveness in predicting the product lifecycle curve that reflects the change of the potential demand. In contrast to the linear demand function, we propose a gradient pricing mechanism based on marginal sales and total sales to describe the relationship between price and potential demand throughout the life cycle. Particularly, the dynamic surge pricing model degrades to Cournot model in the maturity phase of the market. We characterize the dynamic equilibrium and conduct the sensitivity analysis of parameters, showing that the dynamic surge pricing model outperforms Cournot model in terms of profit. A numerical example illustrates that the profit of the dynamic surge pricing model is nearly 21.82% higher than that of Cournot model. • Pricing products in the e-commerce market throughout the product lifecycle. • Using Lotka–Volterra system to predict sale trajectory in response to demand changes. • Gradient pricing mechanism is regulated by the marginal sales and total sales. • The dynamic surge pricing model degrades to Cournot model when the market matures. • This model can increase the firm's revenue by 21.82% as opposed to Cournot model. [ABSTRACT FROM AUTHOR]