Managing product upgrades and rollover under demand uncertainty

Wenju Niu, Juan Chen, Zhao Liu, Lei Guan*, Lianmin Zhang

*此作品的通讯作者

    科研成果: 期刊稿件文章同行评审

    7 引用 (Scopus)

    摘要

    We study the optimal product upgrades and rollover strategies of a risk-averse firm that is uncertain about future demand. For this purpose, we develop a two-period model based on whether the firm makes upgrading investments and if so which product rollover (solo or dual) strategy it adopts. Analysis of the equilibrium outcomes shows that if the firm is moderately risk-averse, it is unprofitable to upgrade and therefore only sells the first-generation product over two periods. Otherwise, the firm benefits from upgrading investments. In this case, the (solo-) dual-rollover guarantees the maximum total payoff if the degree of risk aversion is (low) high. Our sensitivity analysis demonstrates that: (i) the dual-rollover strategy can be seen as a hedge against increased demand uncertainty; (ii) the firm has a higher likelihood of using the dual-rollover strategy as cannibalization intensifies or intertemporal demand spillovers increase; and (iii) a lower payoff discount rate generally discourages the firm from upgrading the product. When upgrading investments happen, the optimal product rollover strategy is contingent upon the degree of risk aversion and the payoff discount rate.

    源语言英语
    文章编号108762
    期刊Computers and Industrial Engineering
    174
    DOI
    出版状态已出版 - 12月 2022

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    Niu, W., Chen, J., Liu, Z., Guan, L., & Zhang, L. (2022). Managing product upgrades and rollover under demand uncertainty. Computers and Industrial Engineering, 174, 文章 108762. https://doi.org/10.1016/j.cie.2022.108762