The Optimal Timing of the Introduction of New Products

Marzia Raybaudi, Martin Sola () and Shasikanta Naindebam

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: This paper addresses the e¤ects for partial equilibrium models of relaxing one of the critical underlying assumptions of the textbook approach (Dixit and Pyndick, 1994) to investment under uncertainty: either the potential investor has access to a single project or she can consider competing (or complementary) projects independently. This paper studies the investment decision of a multi-product monopolist where the projects exhibit interdepen- dence between the cash ‡ows of di¤erent products. We derive the optimal entry time for each product and show that both the choice and timing of investment is di¤erent from that suggested by the textbook approach. The decision to produce related goods simultaneously or sequentially crucially depends on their degree of substitutability or complementarity.

JEL-codes: D21 D24 D42 D81 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2010-07
New Economics Papers: this item is included in nep-com, nep-ino, nep-ppm and nep-tid
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https://www.utdt.edu/download.php?fname=_127904764682880300.pdf (application/pdf)

Related works:
Working Paper: On The Optimal Timing of Introduction of New Products (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:udt:wpecon:2010-07

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