In this paper, we solve the problem of optimal control of quality-driven product diffusion in a context of monopolistic competition. To do so, we introduce a dynamic demand function leaning on two hypotheses : first, price acts as a signal of quality, second, demand is more sensitive to quality than to price. Using the maximum principle of Pontryagin, we then characterize the optimal dynamic trajectory of quality and its qualitative properties.
EL OUARDIGHI, F. and TAPIERO, C. (1998). Quality and the Diffusion of Innovations. European Journal of Operational Research, pp. 31-38.