Timing of A New Product Introduction

Abstract

The goal of this research is to explore the optimal time for introducing a new product or service in a competitive market and to identify the parameters to which this optimal time is most sensitive. A stochastic model is developed that would assess the impact of the time of introduction of the product or service on its overall value. This is a theoretical model that combines a life cycle model with the effects of competition. This model is then simulated under different scenarios and the results obtained are discussed. In general there is a tradeoff between introducing the product too early and thus losing out on future technological efficiencies and the risk of another firm introducing the product first and capturing market share. The results indicate that estimating the expected time of entry by the competitor is a critical part in this decision making process. A general illustrative example is used. Sensitivity analysis suggests that the parameter representing the increase in technological efficiency over time can also be significant.