Trash it or sell it? A strategic analysis of development and market introduction of product innovations

Dawid H, Kopel M, Dangl T (2009)
International Game Theory Review 11(3): 321-345.

Journal Article | Published | English

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Abstract
In this paper a quantity-setting duopoly is considered where one firm develops a new product which is horizontally differentiated from the existing product. The main question examined is which strategically important effects occur if the decision to develop the innovation and the decision to introduce the new product in the market are separated. In our multi-stage game the firm's launch decision is explicitly taken into account and we find an equilibrium where the competitor of the potential innovator strategically over-invests in process innovation. In this equilibrium the competitor over-invests in order to push the potential innovator to introduce the new product since this reduces the competition for the existing product. It is shown that this effect has positive welfare implications in comparison with the case where the innovator commits ex ante to launching the new product.
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Dawid H, Kopel M, Dangl T. Trash it or sell it? A strategic analysis of development and market introduction of product innovations. International Game Theory Review. 2009;11(3):321-345.
Dawid, H., Kopel, M., & Dangl, T. (2009). Trash it or sell it? A strategic analysis of development and market introduction of product innovations. International Game Theory Review, 11(3), 321-345.
Dawid, H., Kopel, M., and Dangl, T. (2009). Trash it or sell it? A strategic analysis of development and market introduction of product innovations. International Game Theory Review 11, 321-345.
Dawid, H., Kopel, M., & Dangl, T., 2009. Trash it or sell it? A strategic analysis of development and market introduction of product innovations. International Game Theory Review, 11(3), p 321-345.
H. Dawid, M. Kopel, and T. Dangl, “Trash it or sell it? A strategic analysis of development and market introduction of product innovations”, International Game Theory Review, vol. 11, 2009, pp. 321-345.
Dawid, H., Kopel, M., Dangl, T.: Trash it or sell it? A strategic analysis of development and market introduction of product innovations. International Game Theory Review. 11, 321-345 (2009).
Dawid, Herbert, Kopel, Michael, and Dangl, Thomas. “Trash it or sell it? A strategic analysis of development and market introduction of product innovations”. International Game Theory Review 11.3 (2009): 321-345.
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