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Multi-generation pricing and timing decisions in new product development

Author

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  • Michelle M.H. Şeref
  • Janice E. Carrillo
  • Arda Yenipazarli

Abstract

When planning for the introduction of a stream of new products into the marketplace, managers must consider both the timing and dynamic pricing decisions to determine an appropriate entry strategy into the marketplace. Literature in new product development (NPD) typically addresses optimal timing and pricing decisions independently. We develop an analytical model of coordinated product timing and pricing decisions when there are two generations of a new product under consideration. Factors driving the timing and pricing decisions include the unit sales and cost relationships for each generation as well as NPD costs for introducing the next generation of products. We derive analytic results that characterise the optimal timing and pricing strategies for a single product rollover scenario. We analyse several numerical examples to illustrate the interplay between optimal pricing and time-to-market strategies under more general settings.

Suggested Citation

  • Michelle M.H. Şeref & Janice E. Carrillo & Arda Yenipazarli, 2016. "Multi-generation pricing and timing decisions in new product development," International Journal of Production Research, Taylor & Francis Journals, vol. 54(7), pages 1919-1937, April.
    • Handle: RePEc:taf:tprsxx:v:54:y:2016:i:7:p:1919-1937
    DOI: 10.1080/00207543.2015.1061220
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    Cited by:

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    2. Hyoung Jun Kim & Su Jung Jee & So Young Sohn, 2021. "Cost–benefit model for multi-generational high-technology products to compare sequential innovation strategy with quality strategy," PLOS ONE, Public Library of Science, vol. 16(4), pages 1-17, April.
    3. Wang, Zhanpeng & Ye, Chao & Liu, Xinxin & Ma, Ruize & Sun, Zilai & Ruan, Junhu, 2023. "Optimal retail sales strategies for old and new products in monopoly and horizontal competition scenarios," Journal of Retailing and Consumer Services, Elsevier, vol. 71(C).
    4. Negahban, Ashkan & Smith, Jeffrey S., 2018. "Optimal production-sales policies and entry time for successive generations of new products," International Journal of Production Economics, Elsevier, vol. 199(C), pages 220-232.
    5. Samuel Sale, R. & Mesak, Hani I. & Inman, R. Anthony, 2017. "A dynamic marketing-operations interface model of new product updates," European Journal of Operational Research, Elsevier, vol. 257(1), pages 233-242.
    6. Richard F. Hartl & Peter M. Kort & Andrea Seidl, 2020. "Decisions on pricing, capacity investment, and introduction timing of new product generations in a durable-good monopoly," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 28(2), pages 497-519, June.

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