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

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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
    DOI: 10.1287/mksc.13.4.392
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    Cited by:

    1. Sanjay Jain, 2008. "Digital Piracy: A Competitive Analysis," Marketing Science, INFORMS, vol. 27(4), pages 610-626, 07-08.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. Ximin (Natalie) Huang & Atalay Atasu & L. Beril Toktay, 2019. "Design Implications of Extended Producer Responsibility for Durable Products," Management Science, INFORMS, vol. 67(6), pages 2573-2590, June.
    9. Ram Bala & Sumit Kunnumkal & Milind G. Sohoni, 2016. "Evergreening and operational risk under price competition," Naval Research Logistics (NRL), John Wiley & Sons, vol. 63(1), pages 71-89, February.
    10. 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.
    11. Aditya Jain & Milind Sohoni, 2015. "Should firms conceal information when dealing with common suppliers?," Naval Research Logistics (NRL), John Wiley & Sons, vol. 62(1), pages 1-15, February.
    12. Grosser Joachim & Sonnabend Hendrik & Westbrock Bastian, 2024. "Close But Not Too Close? Optimal Copycat Strategies in the Light of Negative Publicity by the Original Product," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 24(2), pages 649-658, April.
    13. 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.
    14. 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.
    15. Banerjee, Sumitro & Soberman, David A., 2013. "Product development capability and marketing strategy for new durable products," International Journal of Research in Marketing, Elsevier, vol. 30(3), pages 276-291.
    16. 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.
    17. Drew Fudenberg & Jean Tirole, 1998. "Upgrades, Tradeins, and Buybacks," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 235-258, Summer.
    18. Qiu_Hong Wang & Kai-Lung Hui, 2005. "Technology Timing and Pricing In the Presence of an Installed Base," Industrial Organization 0512013, University Library of Munich, Germany.
    19. 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.
    20. Yi Qian & Qiang Gong & Yuxin Chen, 2015. "Untangling Searchable and Experiential Quality Responses to Counterfeits," Marketing Science, INFORMS, vol. 34(4), pages 522-538, July.
    21. 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.
    22. 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.
    23. Xiaole Wu & Fuqiang Zhang & Yu Zhou, 2022. "Brand Spillover as a Marketing Strategy," Management Science, INFORMS, vol. 68(7), pages 5348-5363, July.
    24. Fethke, Gary & Jagannathan, Raj, 2002. "Monopoly with endogenous durability," Journal of Economic Dynamics and Control, Elsevier, vol. 26(6), pages 1009-1027, June.
    25. Matthew Selove, 2014. "A Dynamic Model of Competitive Entry Response," Marketing Science, INFORMS, vol. 33(3), pages 353-363, May.

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