Product Introduction Strategies And Compatibility Decisions For Durable Goods With Network Effects

Nowadays,many durable goods that people use every day exhibit network effects.The existence of the network effects makes the production,marketing and purchase process of such durable goods present some new features and new rules,which are different from the traditional durable goods.In practice,manufacturers' product introduction strategies and compatibility decisions also have some new phenomena different from traditional markets.Therefore,it is of great theoretical and practical significance to carry out in-depth multi-dimensional analysis and research for durable goods with network effects.This article takes the durable goods with network effects as the research object,takes the sequential innovation as the research background,and conducts a systematic and comprehensive study on the product introduction timing,the optimal pricing and other product strategies and compatibility decisions.We focus on the situation where the magnitude of network effects is relatively large and the product quality improvement degree is small.The optimality of the three product promotion strategies of the firm is studied:(1)replacement strategy,(2)skipping strategy,and(3)shelving strategy.Through the analysis of a two-stage game model,we show the effect of network effects strength and product compatibility settings on manufacturers' optimal product strategies.We first clarify the research background and significance,and briefly explain the contributions and innovations of this paper.Then,we reviewed and combed the literature from the two categories related to durable goods and network effects.First of all,this paper studies the manufacturer's product introduction strategies in the context of full compatibility setting.It finds that the firm's product strategy selection depends on certain conditions and makes a comparative static analysis of its threshold.Next,this paper studies the decision of firm compatibility setting under a given product strategy,reveals that there are great differences in production introduction strategy choices in the context of different compatibility settings,and needs to consider the effects of network effects strength and product quality improvement,and then Using numerical simulations to supplement and test the conclusions obtained above.Finally,we summarized the full text,pointed out the inadequacies and directions for further study.The innovation of this research is mainly reflected in the following three aspects.(1)This article studies a special type of durable goods-durable goods with network effects,and considers the type of product compatibility.When these factors are combined and analyzed,a very rich model can be constructed.Through the analysis of the model,we found that the strength of network effects and product compatibility settings will affect the firm's preference for product strategies.(2)The research background of this article is the sequential innovation of the product,and the new generation of products introduced has a relatively low degree of quality improvement over the older generation of products.In practice,this phenomenon is very common.We have obtained some valuable conclusions through analysis.For example,if the product has a strong network effects,the manufacturer should select the product compatibility setting as full compatibility setting instead of the more common backward compatibility setting.At this point,manufacturers can use the replacement strategy to achieve greater profits.(3)This article is a multi-perspective strategy study.This paper absorbs multidisciplinary theories and technologies,and not only models the analysis of manufacturers' timing strategies and pricing strategies,but also conducts comprehensive discussions on the compatibility decisions of the firm.