Firms in various markets such as health care, financial services, software, consumer goods etc. spend significant amount of money on corporate social responsibility (CSR) activities. The literature suggests ns and this either increases their purchase intention products and services. Unfortunately, notwithstanding its strategic benefits, the empirical findings regarding the impact of CSR n doing so we model two types of CSR (i.e., company ability relevant CSR (CSR-CA) and company ability irrelevant CSR (CSR-NCA)) and allow firms to choose which one to pursue if they decide to invest in CSR, and incorporate the indirect effect of CSR through expectancy disconfirmation literature. Our analysis reveals the conditions under which it is optimal to invest in CSR and of what type. Then, we extend our analysis by investigating how the incr
When a firm introduces a product with new features, some consumers may find it difficult to assess their valuations for these new attributes. Their purchase decisions made under such uncertainty may lead to postpurchase regret. It has been experimentally shown that consumers may anticipate their potential postpurchase regret and make their current choices to mitigate or minimize it. That is, a consumer’s anticipated regret can significantly impact his purchase decision. Given the trend that firms in various markets invoke regret to stimulate sales, this paper analytically explores whether and how anticipated regret affects competing firms’ profits and product innovation. Our analyses reveal that the presence of anticipated regret can increase or decrease firms’ profits, and foster or hinder product innovation depending on whether it makes the consumer segments more or less polarized; in other words, anticipated regret has a nonmonotonic effect on firms’ profits and the entrant’s optimal quality. Therefore, anticipated regret may sometimes create a win-win or a lose-lose situation for both firms. Regardless of whether the impact of anticipated regret on firms’ profits is positive or negative, the magnitude of that impact tends to be higher for the low-quality firm. This paper was accepted by J. Miguel Villas-Boas, marketing.
A firm planning market entry can attempt to develop a product that is either similar to the incumbent's existing offering (imitation) or entirely novel (innovation). The authors establish that when the incumbent is more aggressive in research and development (R&D), this negatively affects the entrant's marginal return on R&D. Thus, if greater profits produce a strong (weak) desire for the incumbent to increase its R&D level, the entrant will respond by sharply decreasing (increasing) its R&D level. As a result, the incumbent's likelihood of retaining the lead position will exhibit an inverse U-shaped pattern as a function of monopoly and duopoly profits. The authors then examine the impact of uncertainty about the rewards from new products and allow firms to conduct market research to resolve the uncertainty. They characterize the conditions for the entrant's innovation versus imitation decision to reveal information about future rewards to the incumbent. When duopoly profits are uncertain and can be either high (upside potential) or low (downside potential), the entry strategy will be revealing if the upside potential is attractive enough relative to monopoly profits. In contrast, when innovation has uncertain commercial potential (i.e., either valued or not valued by consumers), the entry strategy will be revealing if duopoly profits are unattractive relative to monopoly profits. In these cases, the entrant's innovation–imitation decision is driven by market research; this allows the incumbent to forgo market research and infer the true state of demand from the type of entry strategy it observes.
A firm may want to preannounce its plans to develop a new product in order to stimulate future demand. But given that such communications can affect rivals' incentives to develop the same new product, a firm may decide to preannounce untruthfully in order to deter competitors. We examine an incumbent's preannouncement strategy when there is uncertainty regarding the commercial viability of a new product opportunity and a threat of rival entry. Each firm has a private assessment of the market potential for the new product. Two competitive incentives arise for the incumbent in terms of discouraging rival entry: it can use preemptive communication or it can remain silent and instill a pessimistic market potential outlook. We find that an incumbent prefers to follow a vaporware strategy—i.e., declares plans to pursue a new product opportunity even when it may have no development intentions—when its market forecasting capabilities are weak and the demand-side benefits from preannouncing are small. By contrast, when the incumbent has strong market forecasting capabilities and the demand-side benefits are small, the incumbent adopts a suddenware strategy—i.e., remains silent about its new product plans even when it actually plans to develop the new product. Finally, when its market forecasting capabilities are strong and the demand-side benefits are large, the incumbent prefers to engage in a trueware strategy—i.e., truthfully preannounces development plans. We show that an interplay between competition-related and demand-related considerations is what allows trueware to emerge as an equilibrium in the absence of any ex post cost to engaging in vaporware. In an extension, we let the incumbent's actual development plans leak out and allow the entrant to wait and learn those plans prior to setting a research and development level. We identify conditions for the entrant to postpone development despite the risk of being late to market, as well as conditions for the entrant to commence development immediately despite not knowing the incumbent's plans based on the observed preannouncement strategy.
D isruptive innovations introduce a new performance dimension into a product category, but often suffer from inferior performance on key performance dimensions of their existing substitutes. Hence, the followers of these innovations face an important decision to make: they must choose to improve the new technology either on the key performance dimension shared with the old technology or on the new performance dimension. This paper investigates which path firms should choose when they face such a dilemma in the absence of any cost or capability issues. In doing so, we integrate customer response into the theory of technological evolution and allow preferences on the product choices to be context dependent. We show that context-dependent preferences may encourage the follower to improve the new technology on the new performance dimension. Later, we extend our game to a dynamic one and show that the context-dependent preferences may cause the pioneer to innovate less.
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