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

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  • 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
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    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).

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