Managing a Product Family Under Stochastic Technological Changes

Int. J. of Prod. Economics, 122, pp. 567–580, 2009

Posted: 17 Oct 2017

See all articles by Özalp Özer

Özalp Özer

Jindal School of Management - The University of Texas at Dallas

Date Written: February 4, 2009

Abstract

This paper characterizes a decision framework by which a firm can manage generational product replacements under stochastic technological changes. First, we characterize an optimal threshold-based product replacement policy that maximizes the firm’s expected total profit for a finite planning horizon. With this policy, the firm should optimally replace its current product when the performance gap of the product is above a threshold. Upon each product replacement, we also show that the firm should adopt the latest technology for the new product. Second, using stochastic ordering concepts,we quantify the negative impact from the accelerated technological changes on the expected total profit. Finally, we provide an analytical example based on a consumer choice model and characterize a technology follower’s joint product replacement and pricing decisions upon the arrival of each innovation from a technology leader.

Suggested Citation

Özer, Özalp, Managing a Product Family Under Stochastic Technological Changes (February 4, 2009). Int. J. of Prod. Economics, 122, pp. 567–580, 2009. Available at SSRN: https://ssrn.com/abstract=3051993

Özalp Özer (Contact Author)

Jindal School of Management - The University of Texas at Dallas ( email )

Jindal School of Management
800 W. Campbell Road
Richardson, TX 75080
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
58
PlumX Metrics