Integrated Product Architecture and Pricing for Managing Sequential Innovation
研究企业如何通过模块化可升级产品架构与定价协同决策，解决消费者因预期产品改进而延迟购买的问题，并分析设计不一致性对利润和消费者剩余的影响。
Science and technology advances drive firms to continually enhance their product's performance and launch sequentially improving offerings. Firms face challenges in marketing such improving products to well-informed, forward-looking consumers who anticipate product improvements and seek to delay their purchase timing. Product design, specifically a modular upgradable architecture in which improving and stable subsystems of a product are separated and selectively upgraded, can be a valuable approach for marketers to alleviate consumer concerns about product obsolescence. However, such an architecture-based approach can present new challenges as well, and dealing with them requires carefully coordinated cross-functional decision making by the firm. In this paper, we identify and formalize the notion of design inconsistency, which refers to the monopolist firm's inability to commit to future product design architectures. We find that firms experience design inconsistency even when they are able to commit to future prices, and design inconsistency lowers firm profits as well as consumer surplus. We then derive a joint product architecture and pricing approach to solve this problem; this enables an innovating firm to optimally and in a time-consistent manner launch modular upgradable products. The modeling and analysis in the paper lends insight into types of markets and products for which modular upgradability is most appropriate and offers guidelines on making pricing and product design decisions jointly for managing sequential innovation. This paper was accepted by Preyas Desai, marketing.