Abstract. This paper studies the problem of modular architecture when the durable goods are sequential innovation and manufacturers adopt the trade-in policy. It is assumed that consumer preferences for product quality are uniformly heterogeneous. In order to expand sales, the manufacturers used the trade-in policy to buy back the old modules. Through the study found that, The manufacturer's profit is commonly effect by upgrading quality loss and the second version improved module and the launch time of second version product and not the loss degree is low, the high quality of product must makes high profits. When the product is gradual improvement, the quality of the second version product is not high, the attraction of high-end consumers is insufficient, so these consumers will choose to buy the first version of product and then upgrade product. if the product design can not make the loss degree low enough, the manufacturer should not put much resources into the improvement of the performance module in the future to improve the quality.
Abstract. This paper studies the problem of whether the product design framework is modular or integrated when the durable goods are sequential innovation and manufacturers adopt the trade-in policy. It is assumed that consumer preferences for product quality are uniformly heterogeneous. Whether modular or integrated, the design architecture consists of the underlying module and the improvement module. The difference is that the modular architecture has a quality loss when upgrading the replacement module. In order to expand sales, the manufacturers used the trade-in policy to buy back the old products or modules. Through the study found that, when the second generation of products is rapidly improved, manufacturers should first stage sales of the first version product, the second stage the manufacturer to replace the first version product is the second generation of products, rather than the second version product sales. When the second version product is gradually improved, the new product launch time relatively early, manufacturers choose the integrated architecture; new product launch time is relatively late and the second version module quality performance improvement over the threshold, manufacturers choose to design modular architecture.
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