Author: Jonghwa LeePublisher:
ISBN:
Category : Competition, Unfair
Languages : en
Pages : 310
Book Description
Durable Goods Monopolist Under Technological Innovation
Author: Jonghwa LeePublisher:
ISBN:
Category : Competition, Unfair
Languages : en
Pages : 310
Book Description
Durable Goods Monopoly Under Technological Innovation
Author: In Ho LeeInnovation and the Durable Goods Monopolist
Author: Ramesh ShankarPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
When an improvable durable good (such as packaged software) saturates the market, the seller could be tempted to release new versions too frequently, hurting her profit. A novel contractual device, which we term as a Free New Version Rights warranty (Free NVR warranty), can help the seller overcome this temptation. In a two-period game-theoretic model involving a monopolist firm facing heterogeneous consumers, we derive conditions under which a rational monopolist can act suboptimally: she could face a commitment problem and offer the new version, even if doing so lowers her overall profit. Profit is hurt because when consumers expect a new version, (a) fewer consumers buy the initial version, and (b) the monopolist is forced to charge a lower price for the initial version. We show how the free NVR warranty, which requires the monopolist to offer consumers the right to receive the new version for free for a limited period, can solve her commitment problem. This is a new, surprising finding: by bundling new-version rights with the initial version, the monopolist at first appears to be denying herself future revenue. We derive conditions under which this apparently unprofitable action is optimal, which is our main contribution. When free NVR is offered, consumer surplus decreases and social surplus increases. This work extends prior literature on durable goods and the Coase conjecture to innovative durable goods with network externalities. The findings have important practical implications for firms selling new versions of innovative durable goods subject to network effects, as well as for their consumers.
Durable-Goods Monopoly with Endogenous Innovation
Author: Jae Hyon NahmPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
While selling an existing product, a durable-goods monopolist may develop a new, improved product. The firm must consider the interaction between its intertemporal pricing and research and development (R&D) decisions. The interactions show a sharp dichotomy depending on pricing regimes. When it is optimal for the firm to continue to sell the old model along with the new model, the interactions disappear. However, when it is optimal for the firm to discontinue the sale of the old model after introducing the new model, the firm will face a time-inconsistency problem in its R&D decision.
A Note on Durable Goods Monopolists
Author: Sang-Ho LeePublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This note re-examines the previous results on durable goods monopolists under the time inconsistency problem that the firm tends to make its goods less compatible as a “planned obsolescence” strategy in the presence of network effects. We find that the possibility of the commitment to forward compatibility is profitable to the monopolist, depending upon the degree of technological progress and network effects. Therefore, contractual commitments that are frequently feasible and observed in real-world markets make the society better off.
Tethered Durable Goods and Installed Base Degradation Via Software Updates
Author: Ramesh ShankarPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
In this paper we study a monopolist technology vendor's decision to degrade their installed base when they release their newer version. An installed base of products that are technologically tethered, whether digital products such as smartphones or predominantly non-digital products such as automobiles, can be degraded in performance through software updates. This raises new possibilities and temptations for sellers, and therefore new questions not hitherto addressed in the literature on durable goods and innovation, on the optimal product policy for durable goods monopolists. In contrast to the traditional planned obsolescence literature, where the seller has to introduce novel versions (novel in either fashion or functional features) to obsolete their installed base of older versions, in the changed scenario when a seller can degrade their installed base via a software update, they don't have to rely on product novelty to encourage consumers to buy the new product. In a two-period setting featuring a monopolist selling a durable good to a unit mass of consumers with uniformly distributed valuation for the good, we show that installed base degradation can emerge in equilibrium, with or without innovation. In the absence of innovation (i.e. same durable good available for sale in both periods), our model first finds that the seller is mostly better off not degrading their installed base in period 2, except for products with very low marginal cost relative to value, which should be leased and not sold. Nevertheless, the seller faces a commitment problem and is tempted to degrade the installed base in period 2, for a substantial part of the parameter space. Next, in the presence of innovation, we find that the seller is better off not degrading the earlier version in the later period, when the marginal cost is high relative to product value, and innovation is low, or when marginal cost is very low and innovation is very high. But there exists a substantial region in the middle, when marginal cost is low to medium, and innovation is medium to high, when the seller earns a higher profit overall by degrading their installed base in period 2, which explains why durable goods vendors may face incentives to engage in this practice. With innovation, there also exists a region in the parameter space where the seller faces a commitment problem and achieves sub-optimal profit by degrading their installed base in period 2, when they could earn a higher profit by refraining from doing so. Even when the seller degrades the installed base, they choose a sub-optimal price, due to a different kind of commitment problem. In the no-innovation scenario, installed base degradation is mostly sub-optimal to the seller due to the commitment problem, whereas in the innovation scenario, installed base degradation is mostly optimal with a relatively smaller sub-optimal region.
The Optimal Suppression of a Low-Cost Technology by a Durable-Good Monopoly
Author: Larry S. KarpPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
If a durable-good monopoly can use either of two technologies whose properties are known to consumers, the monopoly uses only the technology with the lowest average cost at low levels of production. If consumers know only about technologies in use, the monopoly may use an inferior technology initially to increase its profits, keeping the new, efficient technology secret and switching later. Thus, in either case, an inferior technology may be used; however, switching between technologies occurs only if consumers are not fully informed about both technologies.
Successful Marketing Strategy for High-tech Firms
Author: Eric ViardotPublisher: Artech House
ISBN: 9781580537018
Category : Business & Economics
Languages : en
Pages : 338
Book Description
Annotation This revised edition of the bestseller reflects the realities of the new high-tech marketplace where effective marketing strategy counts as much as the latest technology. New material includes case studies on how high-tech giants came out of the tech market meltdown stronger and more competitive.
Natural Monopolies in Digital Platform Markets
Author: Francesco DucciPublisher: Cambridge University Press
ISBN: 1108491146
Category : Business & Economics
Languages : en
Pages : 203
Book Description
Through three case studies, this book investigates whether digital industries are naturally monopolistic and evaluates policy approaches to market power.
Author: