PL EN


2009 | 1 | 1 | 10-18
Article title

INTRODUCTION SEQUENCE WITH FUNCTIONALITY THRESHOLD AND REAL OPTION

Authors
Content
Title variants
Languages of publication
EN
Abstracts
EN
Existing literature on introduction sequence mostly argues against introducing a low-end product before a high-end product. In this paper, The author presents a simple model to show when it can be optimal to introduce a low-end product first. Based on some observations in industry, high-end consumers are not only wealthier, but also more demanding in quality. With this property, introducing a low-end product first without commitment would not cannibalize the high-end segment because it does not satisfy the quality requirements of the high-end consumers. He also allows for a stochastic environment: the firm may find it valuable to retain flexibility, or the so-called 'real options', rather than make commitment about forthcoming products. With this model setup, the author adds a different perspective that it can be optimal to introduce a low-quality product first for purely marketing reasons. He shows that functionality thresholds can play the same role as Piguovian third degree discrimination.
Contributors
author
  • Paul Lacourbe, École Supérieure des Sciences Économiques et Commerciales, Avenue Hirsch, Cergy 95021, France
References
Document Type
Publication order reference
Identifiers
CEJSH db identifier
09LTAAAA07115
YADDA identifier
bwmeta1.element.8fc15d84-4fc1-3c78-be71-2768f4b3f7ee
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