IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v271y2018i3p968-984.html
   My bibliography  Save this article

When to adopt a service innovation: Nash equilibria in a competitive diffusion framework

Author

Listed:
  • Fazıl Paç, M.
  • Savin, Sergei
  • Velu, Chander

Abstract

We study the optimal timing of adoption of a service innovation that a new entrant firm brings to a market populated by two incumbent firms. Our analysis is based on a model of competitive diffusion dynamics that extends the monopolistic Bass model to include customer churn processes, as well as a potential market expansion driven by the innovation. We obtain expressions for the time trajectories of the customer bases, i.e., the numbers of customers that use old and new service processes for the competing firms, as well as sharper, closed-form characterizations for the setting with a stable market and homogeneous imitation process.

Suggested Citation

  • Fazıl Paç, M. & Savin, Sergei & Velu, Chander, 2018. "When to adopt a service innovation: Nash equilibria in a competitive diffusion framework," European Journal of Operational Research, Elsevier, vol. 271(3), pages 968-984.
    • Handle: RePEc:eee:ejores:v:271:y:2018:i:3:p:968-984
    DOI: 10.1016/j.ejor.2018.05.038
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221718304454
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2018.05.038?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Richard J. Gilbert & Marvin Lieberman, 1987. "Investment and Coordination in Oligopolistic Industries," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 17-33, Spring.
    2. Peres, Renana & Muller, Eitan & Mahajan, Vijay, 2010. "Innovation diffusion and new product growth models: A critical review and research directions," International Journal of Research in Marketing, Elsevier, vol. 27(2), pages 91-106.
    3. P. V. (Sundar) Balakrishnan & Surya Pathak, 2014. "Impeding the Juggernaut of Innovation Diffusion: A Production-Constrained Model," Production and Operations Management, Production and Operations Management Society, vol. 23(7), pages 1183-1197, July.
    4. Frank M. Bass, 1969. "A New Product Growth for Model Consumer Durables," Management Science, INFORMS, vol. 15(5), pages 215-227, January.
    5. Lynn O. Wilson & John A. Norton, 1989. "Optimal Entry Timing for a Product Line Extension," Marketing Science, INFORMS, vol. 8(1), pages 1-17.
    6. Jean-Pierre Benoit, 1985. "Innovation and Imitation in a Duopoly," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(1), pages 99-106.
    7. Richard Jensen, 1988. "Information Cost and Innovation Adoption Policies," Management Science, INFORMS, vol. 34(2), pages 230-239, February.
    8. Renato Guseo & Cinzia Mortarino, 2010. "Correction to the Paper “Optimal Product Launch Times in a Duopoly: Balancing Life-Cycle Revenues with Product Cost”," Operations Research, INFORMS, vol. 58(5), pages 1522-1523, October.
    9. John W. Mamer & Kevin F. McCardle, 1987. "Uncertainty, Competition, and the Adoption of New Technology," Management Science, INFORMS, vol. 33(2), pages 161-177, February.
    10. Yogesh V. Joshi & David J. Reibstein & Z. John Zhang, 2009. "Optimal Entry Timing in Markets with Social Influence," Management Science, INFORMS, vol. 55(6), pages 926-939, June.
    11. Andrew A. King & Christopher L. Tucci, 2002. "Incumbent Entry into New Market Niches: The Role of Experience and Managerial Choice in the Creation of Dynamic Capabilities," Management Science, INFORMS, vol. 48(2), pages 171-186, February.
    12. Sergei Savin & Christian Terwiesch, 2005. "Optimal Product Launch Times in a Duopoly: Balancing Life-Cycle Revenues with Product Cost," Operations Research, INFORMS, vol. 53(1), pages 26-47, February.
    13. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 27-41.
    14. Hemant K. Bhargava & Byung Cho Kim & Daewon Sun, 2013. "Commercialization of Platform Technologies: Launch Timing and Versioning Strategy," Production and Operations Management, Production and Operations Management Society, vol. 22(6), pages 1374-1388, November.
    15. Pankaj Ghemawat, 1991. "Market Incumbency and Technological Inertia," Marketing Science, INFORMS, vol. 10(2), pages 161-171.
    16. Guseo, Renato & Mortarino, Cinzia, 2012. "Sequential market entries and competition modelling in multi-innovation diffusions," European Journal of Operational Research, Elsevier, vol. 216(3), pages 658-667.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Weihua Liu & Shangsong Long & Yanjie Liang & Jinkun Wang & Shuang Wei, 2023. "The influence of leadership and smart level on the strategy choice of the smart logistics platform: a perspective of collaborative innovation participation," Annals of Operations Research, Springer, vol. 324(1), pages 893-935, May.
    2. Liu, Weihua & Long, Shangsong & Wei, Shuang, 2022. "Correlation mechanism between smart technology and smart supply chain innovation performance: A multi-case study from China's companies with Physical Internet," International Journal of Production Economics, Elsevier, vol. 245(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Petropoulos, Fotios & Apiletti, Daniele & Assimakopoulos, Vassilios & Babai, Mohamed Zied & Barrow, Devon K. & Ben Taieb, Souhaib & Bergmeir, Christoph & Bessa, Ricardo J. & Bijak, Jakub & Boylan, Joh, 2022. "Forecasting: theory and practice," International Journal of Forecasting, Elsevier, vol. 38(3), pages 705-871.
      • Fotios Petropoulos & Daniele Apiletti & Vassilios Assimakopoulos & Mohamed Zied Babai & Devon K. Barrow & Souhaib Ben Taieb & Christoph Bergmeir & Ricardo J. Bessa & Jakub Bijak & John E. Boylan & Jet, 2020. "Forecasting: theory and practice," Papers 2012.03854, arXiv.org, revised Jan 2022.
    2. Guidolin, Mariangela & Guseo, Renato, 2015. "Technological change in the U.S. music industry: Within-product, cross-product and churn effects between competing blockbusters," Technological Forecasting and Social Change, Elsevier, vol. 99(C), pages 35-46.
    3. Peres, Renana & Muller, Eitan & Mahajan, Vijay, 2010. "Innovation diffusion and new product growth models: A critical review and research directions," International Journal of Research in Marketing, Elsevier, vol. 27(2), pages 91-106.
    4. Zhiling Guo & Jianqing Chen, 2018. "Multigeneration Product Diffusion in the Presence of Strategic Consumers," Information Systems Research, INFORMS, vol. 29(1), pages 206-224, March.
    5. Claudia Furlan & Cinzia Mortarino & Mohammad Salim Zahangir, 2021. "Interaction among three substitute products: an extended innovation diffusion model," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 30(1), pages 269-293, March.
    6. Guseo, Renato & Schuster, Reinhard, 2021. "Modelling dynamic market potential: Identifying hidden automata networks in the diffusion of pharmaceutical drugs," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 581(C).
    7. Shi, Xiaohui & Chumnumpan, Pattarin, 2019. "Modelling market dynamics of multi-brand and multi-generational products," European Journal of Operational Research, Elsevier, vol. 279(1), pages 199-210.
    8. Shi, Xiaohui & Li, Feng & Bigdeli, Ali Ziaee, 2016. "An examination of NPD models in the context of business models," Journal of Business Research, Elsevier, vol. 69(7), pages 2541-2550.
    9. Guseo, Renato & Mortarino, Cinzia & Darda, Md Abud, 2015. "Homogeneous and heterogeneous diffusion models: Algerian natural gas production," Technological Forecasting and Social Change, Elsevier, vol. 90(PB), pages 366-378.
    10. Semra Gunduc, 2021. "Diffusion of Innovation In Competitive Markets-A Study on the Global Smartphone Diffusion," Papers 2103.07707, arXiv.org.
    11. Guidolin, Mariangela & Alpcan, Tansu, 2019. "Transition to sustainable energy generation in Australia: Interplay between coal, gas and renewables," Renewable Energy, Elsevier, vol. 139(C), pages 359-367.
    12. Mariangela Guidolin & Renato Guseo, 2020. "Has the iPhone cannibalized the iPad? An asymmetric competition model," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 36(3), pages 465-476, May.
    13. Saurabh Panwar & P. K. Kapur & Ompal Singh, 2021. "Predicting diffusion dynamics and launch time strategy for mobile telecommunication services: an empirical analysis," Information Technology and Management, Springer, vol. 22(1), pages 33-51, March.
    14. Marion Debruyne & David J. Reibstein, 2005. "Competitor See, Competitor Do: Incumbent Entry in New Market Niches," Marketing Science, INFORMS, vol. 24(1), pages 55-66, December.
    15. Teck-Hua Ho & Shan Li & So-Eun Park & Zuo-Jun Max Shen, 2012. "Customer Influence Value and Purchase Acceleration in New Product Diffusion," Marketing Science, INFORMS, vol. 31(2), pages 236-256, March.
    16. Yogesh V. Joshi & David J. Reibstein & Z. John Zhang, 2009. "Optimal Entry Timing in Markets with Social Influence," Management Science, INFORMS, vol. 55(6), pages 926-939, June.
    17. Hongmin Li & Dieter Armbruster & Karl G. Kempf, 2013. "A Population-Growth Model for Multiple Generations of Technology Products," Manufacturing & Service Operations Management, INFORMS, vol. 15(3), pages 343-360, July.
    18. Tolotti, Marco & Yepez, Jorge, 2020. "Hotelling-Bertrand duopoly competition under firm-specific network effects," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 105-128.
    19. Negahban, Ashkan & Smith, Jeffrey S., 2018. "Optimal production-sales policies and entry time for successive generations of new products," International Journal of Production Economics, Elsevier, vol. 199(C), pages 220-232.
    20. Renato Guseo & Cinzia Mortarino, 2014. "Multivariate nonlinear least squares: robustness and efficiency of standard versus Beauchamp and Cornell methodologies," Computational Statistics, Springer, vol. 29(6), pages 1609-1636, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:271:y:2018:i:3:p:968-984. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.