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Effects of Strategic Consumer Behavior on Radical New Product Capacity Decision

  • Guojun Ji
  • Guangyong Yang
Conference paper
Part of the Communications in Computer and Information Science book series (CCIS, volume 208)

Abstract

When radical new product is introduced to market, capacity and demand behave highly mismatch, so capacity decision has been a key issue that innovator need to consider. We consider three types of consumers: myopic consumers, strategic consumers and bargain-hunters, in which strategic consumers choose inter-temporal purchase timing. Firstly, we find that when the fraction of strategic consumers grows to some level, an extra fraction of strategic consumers will not influence the innovator’s capacity decision without speculator cases. Secondly, we study speculative behavior case, our results show that if speculator is risk averse, it’s no impact on innovator; if speculator behaves risk preference, innovator’s optimal capacity and quantity hoarded by speculator’s decrease in fraction of strategic customers and capacity cost. Finally, we show that speculator can alleviate mismatch risk between supply and demand, however, only fraction of strategic customers higher than some threshold level, speculator can increase innovator’s profits.

Keywords

strategic consumers speculative behavior radical new product rational expectation 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  • Guojun Ji
    • 1
  • Guangyong Yang
    • 1
  1. 1.School of ManagementXiamen UniversityXiamenChina

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