Optimal response to a next generation new product introduction: to imitate or to leapfrog?

D. Sudharshan, Ben Shaw-Ching Liu and Brian T. Ratchford
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D. Sudharshan: Gatton College of Business and Economics, University of Kentucky, 255F Business and Economics Bldg., Lexington, KY 40506-0034, USA, Postal: Gatton College of Business and Economics, University of Kentucky, 255F Business and Economics Bldg., Lexington, KY 40506-0034, USA
Ben Shaw-Ching Liu: College of Business Administration, Butler University, 4600 Sunset Ave. Indianapolis, IN 46208, USA, Postal: College of Business Administration, Butler University, 4600 Sunset Ave. Indianapolis, IN 46208, USA
Brian T. Ratchford: Robert H. Smith School of Business, University of Maryland, 3467 Van Mulching Hall, College Park, MD 20742, USA, Postal: Robert H. Smith School of Business, University of Maryland, 3467 Van Mulching Hall, College Park, MD 20742, USA

Managerial and Decision Economics, 2006, vol. 27, issue 1, pages 41-62

Abstract: In this paper, we study the choice of technology levels and timing of the introduction of new technologies in a market in which customer sophistication increases over time. Faced with the introduction of a new generation product, a firm can either imitate or leapfrog it. If the new product is introduced optimally, we show that the optimal response is to imitate it. This is because the technology leader's best strategy is to set a technology level that makes imitation the best response. We also derive decision rules for the timing of introduction of new technologies. Copyright © 2005 John Wiley & Sons, Ltd.

Date: 2006
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