Market Effects of New Product Introduction: Evidence from the Brew-at-home Coffee Market

Philip Gayle () and Ying Lin

MPRA Paper from University Library of Munich, Germany

Abstract: The introduction of new products has always been an important source of economic development and improvement in consumer welfare. With retail coffee data spanning five years after the single-cup brew coffee pods were introduced to grocery chains, this paper empirically studies the market effects of new product introduction in the brew-at-home coffee market. We use a structural model of demand and supply to capture the changes in consumers’ preference for this new product over time. The demand estimates suggest that consumers’ relative preference and willingness-to-pay for the new product grew substantially over the sample periods. The analysis reveals the extent to which the introduction and growing presence of the new product simultaneously expanded the relevant market and cannibalized the sales of pre-existing substitute products (traditional auto-drip brew coffee products). Furthermore, we quantify the annually expanding welfare gains of the average consumer attributable to the new product.

Keywords: New product introduction; Willingness-to-pay; Market-expansion; Demand-cannibalization; Brew-at-home coffee market (search for similar items in EconPapers)
JEL-codes: D12 L13 L66 (search for similar items in EconPapers)
Date: 2022-02-28
New Economics Papers: this item is included in nep-com, nep-dcm and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Market effects of new product introduction: Evidence from the brew‐at‐home coffee market (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:112124

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