Sequential Product Positioning Under Differential Costs

This paper examines the product positioning decisions of firms that enter a market sequentially and that have potentially different cost structures. It shows that if the first mover knows the second mover to have a lower production cost, it positions away from the most attractive location in the market; further, the larger the second-mover's cost advantage, the farther away the first mover positions from the most attractive location. The paper also models uncertainty in the first-mover's mind about the later-entrant's cost structure, and shows that an increase in this uncertainty (in the sense of mean-preserving spread) also makes the first mover position farther from the most attractive location in the market. Overall, this paper suggests that unless the first entrant in a market is certain that the later entrant will not have a superior cost structure, it may be better off leaving the best position in the market vacant and having a niche or fringe product.

• 저널Management Science · 46(7) · 928–940
• 토픽Consumer Market Behavior and Pricing · Marketing
• DOI10.1287/mnsc.46.7.928.12038
• 저자Rajeev K. Tyagi