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