Monopolists and Viscous Demand

We characterize the optimal dynamic price policy of a monopolist who faces quot;viscousquot;demand for its services. Demand is viscous if it adjusts relatively slowly to price changes.We show that with the optimal policy the monopolist stops short of achieving 100% marketpenetration, even when all of the consumers have the same long-run willingness to pay for theservice. Furthermore, for certain parameter values in the model, the price policy requires rapidoscillations of the price path