The design and introduction of product lines when consumer valuations are uncertain

Koenigsberg, O and Biyalogorsky, E (2014) The design and introduction of product lines when consumer valuations are uncertain. Production and Operations Management, 23 (9). pp. 1539-1548. ISSN 1059-1478

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Abstract

This article presents a model of the design and introduction of a product line when the firm is uncertain about consumer valuations for the products. We find that product line introduction strategy depends on this uncertainty. Specifically, under low levels of uncertainty the firm introduces both models during the first period; under higher levels of uncertainty, the firm prefers sequential introduction and delays design of the second product until the second period. Under intermediate levels of uncertainty the firm's first product should be of lower quality than one produced by a myopic firm that does not take product line effects into consideration. We find that when the firm introduces a product sequentially, the strategy might depend on realized demand. For example, if realized demand is high, the firm's second product should be a higher-end model; if demand turns out to be low, the firm's second product should be a lower-end model or replace the first product with a lower-end model.

Item Type: Article
Additional Information: © 2014 John Wiley & Sons, Inc.
Subject Areas: Marketing
DOI: 10.1111/poms.12167
Date Deposited: 02 Mar 2016 18:51
Last Modified: 11 Nov 2016 16:13
URI: http://lbsresearch.london.edu/id/eprint/158

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