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Competitive Entry and Pricing Responses to Product Innovation

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Author Info
Barry Bayus (University of North Carolina, Chapel Hill)
Pradeep Chintagunta (University of Chicago)

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Abstract

In this paper, we study competitive response to a product innovation. We consider the dynamic interaction between a "Defender" (a firm with a first generation product) and an "Attacker" (a firm with a second generation product). The second generation product entry decision of the Defender, as well as the pricing decisions of both firms, are analyzed. Analytical results are derived by developing a 3-period pricing game, and studying closed-loop policies for a Nash equilibrium. These results allow us to identify strategies in which the Attacker can prevent (or delay) a competitive response by the Defender. Some empirical support for our analytical results is also provided by pricing data and information on the timing of successive product generation introductions in the semiconductor and personal computer industries.

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File URL: http://www.bepress.com/cgi/viewcontent.cgi?article=1001&context=romsjournal
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Publisher Info
Article provided by Berkeley Electronic Press in its journal Review of Marketing Science.

Volume (Year): 1 (2003)
Issue (Month): 1 ()
Pages: 1001-1001
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:bep:revmkt:1:2003:1:1001-1001

Note: oai:bepress:romsjournal-1001
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Related research
Keywords: New Products; Pricing; Competition; Entry;

References listed on IDEAS
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  1. Reinganum, Jennifer F, 1983. "Uncertain Innovation and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 73(4), pages 741-48, September. [Downloadable!] (restricted)
    Other versions:
  2. Arthur Fishman & Rafael Rob, 2000. "Product Innovation by a Durable-Good Monpoly," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 237-252, Summer.
  3. Smith, Ken G. & Grimm, Curtis M. & Chen, Ming-Jer & Gannon, Martin J., 1989. "Predictors of response time to competitive strategic actions: Preliminary theory and evidence," Journal of Business Research, Elsevier, vol. 18(3), pages 245-258, May. [Downloadable!] (restricted)
  4. Jain, Dipak C & Rao, Ram C, 1990. "Effect of Price on the Demand for Durables: Modeling, Estimation, and Findings," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 163-70, April.
  5. Cooper, Arnold C. & Schendel, Dan, 1976. "Strategic responses to technological threats," Business Horizons, Elsevier, vol. 19(1), pages 61-69, February. [Downloadable!] (restricted)
  6. Rosenberg, Nathan & Steinmueller, W Edward, 1988. "Why Are Americans Such Poor Imitators?," American Economic Review, American Economic Association, vol. 78(2), pages 229-34, May. [Downloadable!] (restricted)
  7. Hauser, John R. & Shugan, Steven., 1981. "Defensive marketing stategies," Working papers 1243-81., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
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This page was last updated on 2009-10-23.

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