This paper studies how different types of demand cannibalization take place during product rollovers and their effects on a firm’s profitability. Due to continuous product upgrades, demand cannibalization among various generations of products has become a common practice, raising interesting investigations from professionals and academics. Within this context, we model firms’ and customers’ decision-making as a two-period sequential game and derive equilibrium results under a dual rollover strategy, with and without a trade-in program. We find that demand cannibalization is essentially caused by customers’ strategic comparison of available purchase options. Our analysis further reveals that both the cannibalization effect and the postponement effect resulting from customers’ waiting for upgraded products are necessary for firms to improve profits. On the contrary, the postponement effect due to waiting for a discount is entirely detrimental to the firm. We propose effective launch strategies to avoid unfavorable demand cannibalization under different conditions. In addition, offering trade-in programs helps not only suppress strategic waiting, but also foster demand for an upgraded product. These strategies are particularly effective when the firm holds a greater quantity of inventory or when the degree of incremental innovation is high.

中文翻译：

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在战略客户在场的情况下，在产品转售期间出现需求蚕食


本文研究了产品转卖期间不同类型的需求蚕食如何发生，以及它们对公司盈利能力的影响。由于产品不断升级，各代产品之间的需求蚕食已成为一种普遍做法，这引发了专业人士和学术界的有趣调查。在此背景下，我们将公司和客户的决策建模为两个周期的连续游戏，并在双重展期策略下得出均衡结果，无论有没有以旧换新计划。我们发现，需求蚕食本质上是由客户对可用购买选项的战略比较引起的。我们的分析进一步表明，客户等待升级产品所产生的蚕食效应和延迟效应都是企业提高利润所必需的。相反，等待折扣造成的延期效应对公司完全不利。我们提出有效的启动策略，以避免不同条件下的不利需求蚕食。此外，提供以旧换新计划不仅有助于抑制战略等待，还有助于培养对升级产品的需求。当公司持有大量库存或增量创新程度较高时，这些策略特别有效。