EXPRESS: Product Portfolio Choices with Product Life Cycles

How do multi-product firms adjust their product portfolios in response to increased competition, and what are the implications for policy evaluation? In high-tech markets, products with similar profits at launch may have predictably different future profit paths, shaping firms’ product introduction decisions. Using data from the Chinese smartphone market, the author shows that product life cycles (PLCs) vary systematically with product quality and market competition, and that firms act on these differences when introducing new products. The author embeds firms’ PLC expectations into a structural model of product portfolio competition and evaluates the effects of fringe entry induced by an industrial policy. Counterfactuals show that ignoring firms’ portfolio adjustments overstates consumer welfare gains from increased competition by 70%; conditional on portfolio adjustment, holding PLC expectations fixed understates firms’ portfolio response by 10% and overstates welfare gains by 9%. Increased low-end competition also shifts incumbent firms’ product introductions toward lower-quality “fighting brands.”

• 저널Journal of Marketing
• 토픽Digital Platforms and Economics · Strategy and Management
• DOI10.1177/00222429261455299
• 저자Peichun Wang