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Riding successive product diffusion waves :building a tsunami via upgrade-rebate programs

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Author Info

  • Vardan Avagyan

    ()

  • Mercedes Esteban Bravo

    ()

  • Jose Vidal-Sanz

    ()

Abstract

We discuss how trade-in rebates can be used to manage product multigenerational innovation diffusion waves, and study the optimal behavior of the firm controlling the prices and rebates associated to product upgrades. We show how this strategy accelerates the diffusion and can lead to profit increments of about 5%. The strategy is profitable even when the rebate subsidizes the upgrades entirely.

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File URL: http://e-archivo.uc3m.es/bitstream/10016/12693/1/wb114011.pdf
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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía de la Empresa in its series Business Economics Working Papers with number wb114011.

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Date of creation: Nov 2011
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Handle: RePEc:cte:wbrepe:wb114011

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Related research

Keywords: New product diffusion; Successive generations; Trade-in; Upgrades; Optimal strategies;

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  1. Heese, Hans S. & Cattani, Kyle & Ferrer, Geraldo & Gilland, Wendell & Roth, Aleda V., 2005. "Competitive advantage through take-back of used products," European Journal of Operational Research, Elsevier, vol. 164(1), pages 143-157, July.
  2. Dan Horsky & Karl Mate, 1988. "Dynamic Advertising Strategies of Competing Durable Good Producers," Marketing Science, INFORMS, vol. 7(4), pages 356-367.
  3. Engelbert Dockner & Steffen Jørgensen, 1988. "Optimal Pricing Strategies for New Products in Dynamic Oligopolies," Marketing Science, INFORMS, vol. 7(4), pages 315-334.
  4. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, December.
  5. Donald Lehmann & Mercedes Esteban-Bravo, 2006. "When giving some away makes sense to jump-start the diffusion process," Marketing Letters, Springer, vol. 17(4), pages 243-254, December.
  6. Stefan Stremersch & Eitan Muller & Renana Peres, 2010. "Does new product growth accelerate across technology generations?," Marketing Letters, Springer, vol. 21(2), pages 103-120, June.
  7. Morris A. Cohen & Jehoshua Eliasberg & Teck-Hua Ho, 1996. "New Product Development: The Performance and Time-to-Market Tradeoff," Management Science, INFORMS, vol. 42(2), pages 173-186, February.
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