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What Should You Do When Your Competitors Send in the Clones?

Author

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  • Devavrat Purohit

    (University of California, Berkeley)

Abstract

This paper develops a model to address an important problem facing a manufacturer of a durable product. That is, how can it plan its new product introductions to minimize the obsolescence of the old product, preserve its market for the new product, and keep copycat products at bay? We analyze these issues by developing a two-period model in which a firm sells an “old” product in period 1 and a “new” product in period 2. We consider various new product introduction strategies such as product replacement, line extension, and upgrading. We find that the optimal response to a threat of competitive clones is to increase the level of product innovation. This increase in innovation coupled with the entry of a competitive product implies that the incumbent firm has less of an incentive to leapfrog the old product or shelve the new product.

Suggested Citation

  • Devavrat Purohit, 1994. "What Should You Do When Your Competitors Send in the Clones?," Marketing Science, INFORMS, vol. 13(4), pages 392-411.
  • Handle: RePEc:inm:ormksc:v:13:y:1994:i:4:p:392-411
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    File URL: http://dx.doi.org/10.1287/mksc.13.4.392
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    Cited by:

    1. Laksana, Kamonkan & Hartman, Joseph C., 2010. "Planning product design refreshes with service contract and competition considerations," International Journal of Production Economics, Elsevier, vol. 126(2), pages 189-203, August.
    2. Sumitro Banerjee & David A. Soberman, 2013. "Product development capability and marketing strategy for new durable products," ESMT Research Working Papers ESMT-13-01, ESMT European School of Management and Technology.
    3. John Hauser & Gerard J. Tellis & Abbie Griffin, 2006. "Research on Innovation: A Review and Agenda for," Marketing Science, INFORMS, vol. 25(6), pages 687-717, 11-12.
    4. Elie Ofek & Miklos Sarvary, 2003. "R&D, Marketing, and the Success of Next-Generation Products," Marketing Science, INFORMS, vol. 22(3), pages 355-370, July.
    5. Hernández-Mireles, C. & Franses, Ph.H.B.F., 2010. "The Launch Timing of New and Dominant Multigeneration Technologies," ERIM Report Series Research in Management ERS-2010-022-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    6. Morris A. Cohen & Jehoshua Eliashberg & Teck H. Ho, 2000. "An Analysis of Several New Product Performance Metrics," Manufacturing & Service Operations Management, INFORMS, vol. 2(4), pages 337-349, July.
    7. Wilhelm, Wilbert E. & Xu, Kaihong, 2002. "Prescribing product upgrades, prices and production levels over time in a stochastic environment," European Journal of Operational Research, Elsevier, vol. 138(3), pages 601-621, May.
    8. Drew Fudenberg & Jean Tirole, 1998. "Upgrades, Tradeins, and Buybacks," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 235-258, Summer.
    9. Baohong Sun & Jinhong Xie & H. Henry Cao, 2004. "Product Strategy for Innovators in Markets with Network Effects," Marketing Science, INFORMS, vol. 23(2), pages 243-254, October.
    10. Teng, Jinn-Tsair & Thompson, Gerald L., 1996. "Optimal strategies for general price-quality decision models of new products with learning production costs," European Journal of Operational Research, Elsevier, vol. 93(3), pages 476-489, September.
    11. Franses, Ph.H.B.F. & Hernández-Mireles, C., 2006. "When Should Nintendo Launch its Wii? Insights From a Bivariate Successive Generation Model," ERIM Report Series Research in Management ERS-2006-032-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    12. Qiu_Hong Wang & Kai-Lung Hui, 2005. "Technology Timing and Pricing In the Presence of an Installed Base," Industrial Organization 0512013, EconWPA.
    13. Fethke, Gary & Jagannathan, Raj, 2002. "Monopoly with endogenous durability," Journal of Economic Dynamics and Control, Elsevier, vol. 26(6), pages 1009-1027, June.
    14. Sanjay Jain, 2008. "Digital Piracy: A Competitive Analysis," Marketing Science, INFORMS, vol. 27(4), pages 610-626, 07-08.
    15. Fethke, Gary & Jagannathan, Raj, 2000. "Why would a durable good monopolist also produce a cost-inefficient nondurable good?," International Journal of Industrial Organization, Elsevier, vol. 18(5), pages 793-812, July.
    16. Rajeev K. Tyagi & Jagmohan S. Raju, 2006. "The pace of intermediate-product introductions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(7), pages 527-535.
    17. Yi Qian & Qiang Gong & Yuxin Chen, 2013. "Untangling Searchable and Experiential Quality Responses to Counterfeits," NBER Working Papers 18784, National Bureau of Economic Research, Inc.

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