Title
New product introduction and capacity investment by incumbents : effects of size on strategy
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
Amsterdam ,
Subject
Economics
Mathematics
Source (journal)
European journal of operational research. - Amsterdam
Volume/pages
230(2013) :1 , p. 133-142
ISSN
0377-2217
ISI
000320211200012
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
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. (C) 2013 Elsevier B.V. All rights reserved.
E-info
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Handle