Selling Innovative Products in the Presence of Externalities

• 成果类型: Article
• 署名作者: Huang, Yufei; Gokpinar, Bilal; Tang, Christopher S.; Yoo, Onesun Steve
• 署名单位: University of Bath; University of London; University College London; University of California System; University of California Los Angeles
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.12864
• 发表日期: 2018
• 页码: 1236-1250
• 关键词: new product introduction; Innovation adoption; consumer anxiety; familiarization; Externality

摘要

When deciding whether to adopt an innovative product or service, consumers often experience different levels of anxiety (i.e., nervousness) that prompt them to resist purchase (e.g., fear of learning new technologies, disruption of established habits or beliefs). In such cases, consumers' anxiety is mitigated by validation through externality (e.g., the number of early adopters). To reduce consumers' anxiety, firms can also invest in familiarization through promotion (e.g., offering free trials). We conceptualize innovation as a product that engenders anxiety, and present a model that employs a consumer utility model focusing on the psychological dimension. We examine the firm's profit-maximizing promotion and pricing decisions when selling to forward-looking consumers in the presence of externality. Our equilibrium analysis reveals that, unlike the conventional wisdom for promoting new products, for anxiety-inducing innovations with externality, accelerating the speed of adoption through promotion can actually be detrimental to the firm.