Product Switching Strategy in a Duopolistic Market with Uncertainty

Abstract

Studies on product switching have taken some important steps since Mori and Goto (2003) proposed a new model to help managers to decide product switching actions in a market where the product has a short lifecycle. The present study, assuming firms are in a duopolistic market with uncertainty, attempts to shed new light on this field. That is, utilizing the optimal stopping theory, a firm's product switching strategy for a duopolistic market is formulated and the property of the optimal timing for switching product is examined. Specifically, consideration is given to preventing imitations and the competitive advantages of the product. Our analysis reveals that the harder it is to imitate a product and the larger the competitive advantage, the longer the product cycle.