 A model of product line design and introduction sequence with reservation utilityPaul Lacourbe European Journal of Operational Research, 2012, vol. 220, issue 2, 338-348 Abstract: Cannibalization is a major concern for a firm when designing a product line. In addition, external options from outside the firm’s product line may also play a significant role. In this paper, we investigate the impact of external options, represented by reservation utility, on product line design and introduction sequence. We find that: (a) heterogeneous reservation utility defines the relative attractiveness of segments and corresponding product line; (b) reservation utility makes it more favorable to introduce products sequentially rather than simultaneously; (c) aggregating segments is an effective way to mitigate cannibalization when it becomes too difficult to manage with different values of reservation utility across multiple segments; and (d) introducing products in a non-monotone order of quality can improve profit from simultaneous introduction when the value of reservation utility of a middle segment is particularly high. Keywords: Product line design; Vertical differentiation; Introduction sequence; External options; Reservation utility (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:220:y:2012:i:2:p:338-348 DOI: 10.1016/j.ejor.2012.01.014 Access Statistics for this article European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati More articles in European Journal of Operational Research from Elsevier |
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