New product introduction and capacity investment by incumbents: Effects of size on strategy
Dawid,H. Kopel,M. Kort,P.M.
Dawid,H.
Kopel,M.
Kort,P.M.
Abstract
We analyze a duopoly where capacity-constrained firms offer an established product and have the option to offer an additional new and differentiated product. We show that the firm with the smaller capacity on the established market has a higher incentive to innovate and reaches a larger market share on the market for the new product. An increase in capacity of the larger firm can prevent its competitor from innovating, whereas an increase in capacity of the smaller firm cannot prevent innovation of its larger competitor. In equilibrium the firm with smaller capacity on the established market might outperform the larger firm with respect to total payoffs.
Description
Date
2013-10
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
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Journal Issue
Keywords
game theory, innovation incentives, capacity choice, multi-product oligopoly, subgame-perfect-equilibrium
Citation
Dawid, H, Kopel, M & Kort, P M 2013, 'New product introduction and capacity investment by incumbents: Effects of size on strategy', European Journal of Operational Research, vol. 230, no. 1, pp. 133-142. https://doi.org/10.1016/j.ejor.2013.04.002
License
info:eu-repo/semantics/restrictedAccess