Product Introduction Strategies under Sequential Innovation for Durable Goods with Network Effects

2016 ◽  
Vol 26 (2) ◽  
pp. 320-340 ◽  
Author(s):  
Ngan N. Chau ◽  
Ramarao Desiraju
Keyword(s):  
Durable Goods ◽  
Network Effects ◽  
Product Introduction ◽  
Sequential Innovation

scholarly journals Patent Scope and Innovation in the Software Industry

2016 ◽  
Author(s):  
Mark Lemley
Keyword(s):  
Network Effects ◽  
Software Industry ◽  
Patent Law ◽  
Fair Use ◽  
Sequential Innovation ◽  
Reverse Engineer ◽  
Prior Art ◽  
Software Patents ◽  
Software Patent ◽  
Experimental Use

Software patents have received a great deal of attention in the academicliterature. Unfortunately, most of that attention has been devoted to theproblem of whether software is or should be patentable subject matter. Withroughly 40,000 software patents already issued, and the Federal Circuitendorsing patentability without qualification, those questions are for thehistory books. The more pressing questions now concern the scope to beaccorded software patents. In this paper, we examine the implications ofsome traditional patent law doctrines for innovation in the softwareindustry. We argue that patent law needs some refinement if it is topromote rather than impede the growth of this new market, which ischaracterized by rapid sequential innovation, reuse and re-combination ofcomponents, and strong network effects that privilege interoperablecomponents and products. In particular, we argue for two sorts of new rulesin software patent cases.First, we advocate a limited right to reverse engineer patented computerprograms in order to gain access to and study those programs and toduplicate their unprotected elements. Such a right is firmly established incopyright law, and seems unexceptional as a policy matter even in patentlaw. But because patent law contains no fair use or reverse engineeringexemption, patentees could use the grant of rights on a single component ofa complex program to prevent any "making" or "using" of the program as awhole, including those temporary uses needed in reverse engineering. Whilepatent law does contain doctrines of "experimental use" and "exhaustion,"it is not at all clear that those doctrines will protect legitimate reverseengineering efforts. We suggest that if these doctrines cannot be readbroadly enough to establish such a right, Congress should create a limitedright to reverse engineer software containing patented components forresearch purposes.Second, we argue that in light of the special nature of innovation withinthe software industry, courts should apply the doctrine of equivalentsnarrowly in infringement cases. The doctrine of equivalents allows afinding of infringement even when the accused product does not literallysatisfy each element of the patent, if there is substantial equivalence asto each element. The test of equivalence is the known interchangeability ofclaimed and accused elements at the time of (alleged) infringement. Anumber of factors unique to software and the software industry - a cultureof reuse and incremental improvement, a lack of reliance on systems offormal documentation used in other technical fields, the short effectivelife of software innovations, and the inherent plasticity of code -severely complicate post hoc assessments of the "known interchangeability"of software elements. A standard for equivalence of code elements thatignores these factors risks stifling legitimate, successful efforts todesign around existing software patents. To avoid this danger, courtsshould construe software claims narrowly, and should refuse a finding ofequivalence if the accused element is "interchangeable" with prior art thatshould have narrowed the original patent, or if the accused improvement istoo many generations removed from the original invention.

scholarly journals The valuation of product introduction time strategies using a real options approach

2021 ◽  
Author(s):  
Mehdi Hossein Yazdi
Keyword(s):  
Life Cycle ◽  
Product Life Cycle ◽  
Durable Goods ◽  
Second Generation ◽  
Net Present Value ◽  
New Technologies ◽  
Drift Rate ◽  
Manufacturing Companies ◽  
Product Introduction ◽  
Pricing Policy

In today’s economy, new technologies rapidly emerge in the durable goods market. Therefore, it is paramount for manufacturing companies to optimize product introduction time for their second-generation product (SGP), which is an upcoming product in the production line, when profitability is at stake. The main factors affecting this timing are technology advancements and changes in customer tastes, which make determining an optimal introduction time for a product a challenging task. The main goal of this research is to find the optimal product introduction time for the SGP that maximizes the net present value (NPV) over a given period while product life cycle (PLC), pricing, and advertising are explicitly being taken into consideration. Demand for each product contains two regimes life cycle, and each regime is defined by a geometric Brownian motion (GBM). Each GBM has a drift rate and volatility. Moreover, there is a correlation between different regimes for different products. Correlated GBMs are discretized using a lattice approach. The Bass model is used to determine demand parameters including drift, volatility, and correlation, while dynamic programming is used to optimize NPV. Flexibilities, such as expansion, contraction, and switching, are identified between two products. Examples are provided to show the applicability of the developed models. Accordingly, the results show as the drift rate, volatility, and initial demand for a first-generation product (FGP) increase, the SGP introduction time has to be delayed. Furthermore, results demonstrate that in decreasing pricing policy, the SGP has to be introduced as early as the FGP. In increasing-decreasing pricing policy, as the increasing pricing rate is increasing, the SGP introduction time is delayed. When the advertising budget percentage increases, the NPV increases up to a certain level and then it will be saturated. Major contributions of this thesis are as follows: first, investigating the product introduction time by integrating marketing and manufacturing aspects; second, developing a model to incorporate the flexibility and production cost of the system for determining the optimal product introduction time. Third, the value of the product introduction time is expressed in terms of dollar value and this would help managers to make decisions easily. The models developed in this research can be used as practical tools for manufacturers to find the optimal product introduction time (PIT) and also the research can be used as a guideline to introduce the second-generation PIT.

Sale or Lease? Durable-Goods Monopoly with Network Effects

2008 ◽  
Vol 27 (6) ◽  
pp. 1012-1019 ◽  
Author(s):  
Hung-Ken Chien ◽  
C. Y. Cyrus Chu
Keyword(s):  
Durable Goods ◽  
Network Effects ◽  
Durable Goods Monopoly

scholarly journals The Strategy of New Product Introduction in Durable Goods with Secondary Market: Application of the Optimization Method to Supply Chain Problem

2014 ◽  
Vol 2014 ◽  
pp. 1-10
Author(s):  
Pei Zhao ◽  
Zhongkai Xiong
Keyword(s):  
Supply Chain ◽  
Durable Goods ◽  
New Product ◽  
Optimization Method ◽  
Secondary Market ◽  
New Product Introduction ◽  
Product Introduction ◽  
Quality Product ◽  
Durable Products ◽  
Second Period

The aim of this paper is to address how the secondary market affects the strategy of the manufacturer’s new product introduction by using the optimization method. To do so, we develop a two-period model in which a monopolistic manufacturer sells its new durable products directly to end consumers in both periods, while an entrant operates a reverse channel selling used products in the secondary market. We assume that the manufacturer launches a higher quality product in the second period for the technological innovation. We find that the secondary market can actually increase the manufacturer’s profitability and drives the new product introduction in the second period. We also derive the effect of the durability and the degree of quality improvement on the pricing of supply chain partners.

scholarly journals The valuation of product introduction time strategies using a real options approach

2021 ◽  
Author(s):  
Mehdi Hossein Yazdi
Keyword(s):  
Life Cycle ◽  
Product Life Cycle ◽  
Durable Goods ◽  
Second Generation ◽  
Net Present Value ◽  
New Technologies ◽  
Drift Rate ◽  
Manufacturing Companies ◽  
Product Introduction ◽  
Pricing Policy

In today’s economy, new technologies rapidly emerge in the durable goods market. Therefore, it is paramount for manufacturing companies to optimize product introduction time for their second-generation product (SGP), which is an upcoming product in the production line, when profitability is at stake. The main factors affecting this timing are technology advancements and changes in customer tastes, which make determining an optimal introduction time for a product a challenging task. The main goal of this research is to find the optimal product introduction time for the SGP that maximizes the net present value (NPV) over a given period while product life cycle (PLC), pricing, and advertising are explicitly being taken into consideration. Demand for each product contains two regimes life cycle, and each regime is defined by a geometric Brownian motion (GBM). Each GBM has a drift rate and volatility. Moreover, there is a correlation between different regimes for different products. Correlated GBMs are discretized using a lattice approach. The Bass model is used to determine demand parameters including drift, volatility, and correlation, while dynamic programming is used to optimize NPV. Flexibilities, such as expansion, contraction, and switching, are identified between two products. Examples are provided to show the applicability of the developed models. Accordingly, the results show as the drift rate, volatility, and initial demand for a first-generation product (FGP) increase, the SGP introduction time has to be delayed. Furthermore, results demonstrate that in decreasing pricing policy, the SGP has to be introduced as early as the FGP. In increasing-decreasing pricing policy, as the increasing pricing rate is increasing, the SGP introduction time is delayed. When the advertising budget percentage increases, the NPV increases up to a certain level and then it will be saturated. Major contributions of this thesis are as follows: first, investigating the product introduction time by integrating marketing and manufacturing aspects; second, developing a model to incorporate the flexibility and production cost of the system for determining the optimal product introduction time. Third, the value of the product introduction time is expressed in terms of dollar value and this would help managers to make decisions easily. The models developed in this research can be used as practical tools for manufacturers to find the optimal product introduction time (PIT) and also the research can be used as a guideline to introduce the second-generation PIT.

Transformation of education as a metatrend of the digital economy

2020 ◽  
Vol 16 (10) ◽  
pp. 1960-1979
Author(s):  
N.A. Egina ◽  
E.S. Zemskova
Keyword(s):  
Human Capital ◽  
Social Transformation ◽  
Network Effects ◽  
Digital Economy ◽  
Network Education ◽  
Economic Progress ◽  
Positive Externalities ◽  
Communication Processes ◽  
Education Network ◽  
The Impact

Subject. The study focuses on the impact of the digital economy determinants of the education transformation. Objectives. The article provides our own approach treating the education capital as a specific asset of the digital economy, which has an acceleration effect and sets up new trends in education through integrative networks. Methods. The study is based on principles of the systems integration, cross-disciplinary and multidisciplinary approaches. Results. The socio-economic progress was found to be determined with properties of human capital, which are solely specific to the digital economy. In new circumstances, it gets more important for actors of global, national, corporate and social networks to more actively cooperate within distributed networks in order to train high professionals, who would have skills in information networks. Thus, they would raise a new form of human capital – the capital of network education (network-based education capital). We describe positive externalities that arise when the educational sector joins communication processes. We illustrate how educational forms evolves, which are typical of a certain phase of the socio-economic development. The education capital was discovered to grow into a specific asset generating the quasi-rent and working as a social ladder only provided more actors are involved into the network. Conclusions and Relevance. Studying the evolution of educational forms through the cross-disciplinary method, we discovered the need for a system approach, which would help substantiate its transformation in the time of the digital economy, and the emergence of network-based education. These are technologies and tools of the digital economy that become unique factors generating the acceleration effect of the educational capital and ensuring the use of diverse network effects for the formation of intellectual capital and their social transformation.

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