| In this dissertation we consider the case when two profit-maximizing firms enter a new market with a competing product that has a finite (and known) life cycle. We exam two firms' decisions on product design, introduction timing, and price. We study these decisions in four different settings where two firms are either symmetric or asymmetric in terms of cost structure and design capability; and firms make their design decisions either simultaneously or sequentially.; The order of entry is a function of two firms' design capabilities, product design levels, and timing of setting the design levels. The first firm entering the market sets a monopoly price for its product and enjoys a monopoly situation until the second firm enters the market. When the second firm enters the market, both firms simultaneously set (or reset) their product prices knowing the design of both products at that time (which we assume are fixed for the remainder of the product's life).; We develop two game-theoretic models that represent the new product introduction process and show that sub-game perfect Nash equilibria occur under certain conditions defined by the product life cycle, product cost, development time, and customer preference. Among other findings, our model shows that product differentiation always arises at equilibrium (when an equilibrium exists) due to the joint effects of resource utilization, price competition and the pressure of opportunity time window. In addition, we show that the strategy of time-based competition is the natural result of firms' improving development capability, reducing product cost, and increasing customer preference. In other words, it is not wise to arbitrarily shorten a product life cycle for the sake of competition since all firms are worse off.; Furthermore, depending on the market characteristics, the first entrant may not necessarily earn the largest profit; and a firm with low-cost advantage or better design capability may not choose to come to market first to maximize its profit in the product life cycle including both monopoly and duopoly periods. We also show that our results are determined by a single product index B that can be easily calculated from existing data. |
