Launching New Products with Cannibalization Potential: An Optimal Timing Framework

Abstract

A normative framework is proposed for the optimal introduction timing of a new product which has the potential for cannibalizing an existing product. The application of the proposed framework is illustrated using a numerical example. The paper also illustrates the sensitivity of the optimal timing to model parameters. The framework shows that as cannibalization increases, the launch timing needs to repostponed and the total profits decline; as the new product’s market potential or profitability increases, the optimal launch timing occurs later. Managerial implications for various scenarios are discussed.

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