Product Introduction Strategies under Sequential Innovation for Durable Goods with Network Effects

• 成果类型: Article
• 署名作者: Chau, Ngan N.; Desiraju, Ramarao
• 署名单位: University of Nebraska System; University Nebraska Kearney; State University System of Florida; University of Central Florida
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.12649
• 发表日期: 2017
• 页码: 320-340
• 关键词: durability; sequential innovation; compatibility; network effects

摘要

When network effects are important and technology is rapidly improved, this study explores the relative optimality of five product introduction strategies of a durable goods manufacturer: (1) replacement, (2) skipping, (3) a delayed line, (4) shelving, and (5) line-extension. Using a two-period analytical model, we show how the type of compatibility-either full or backward compatibility-and the magnitude of the network effect influence the manufacturer's preference for the above strategies. Our analysis reveals that only the strategies (1)-(3) above can be optimal; and the optimal strategy varies with network strength. Further, the type of compatibility can dramatically change the profitability under each optimal strategy; for instance, while backward compatibility can increase the profitability of replacement under certain conditions, it always reduces the profitability of a delayed line. We also illustrate that if compatibility were a choice, although backward compatibility may be observed widely in practice, the parametric region for its optimality is relatively more restricted than that of full compatibility.