Time-to-Market in Vertically Differentiated Industries

Abstract

We study the introduction of new products in a vertically differentiated industry. Innovative firms have to engage into reducing time-to-market investments in order to shorten the time interval between innovation and sales. Still, these investments generate irreversible costs which have to be put in balance with profits accruing to the firm when starting its sales earlier than otherwise. We characterize the optimal investment policies under various assumptions concerning the market structure.

Keywords: time-to-market, market structure, vertical product differentiation

JEL Classification: L11, L13, O31