Price and durability decisions on successive generations of electronic durable goods under incremental innovation

This research explores the decision-making processes of manufacturers regarding pricing and durability of electronic durable products across successive generations. By constructing a two-stage model, we derived the optimal pricing strategy and production strategy for manufacturers. Specifically, we considered the impact of price reductions on older products and pre-launch activities for new products on consumer behavior, especially that of strategic consumers. An interesting finding is that traditional sales strategies of discounting older products do not increase revenue, but rather harm overall profits. Our results provide guidance for manufacturers of electronic durable goods in formulating strategies for product upgrades and new product sales strategies.