신기술 개발에 대처하기 위한 자기시장 잠식의 의사결정

초록

When an entrant firm offers a better quality product based on new technological innovation, incumbent firm may also develop and introduce the similar product, which may cannibalize existing product offering of its own. We setup a duopoly model in which incumbent and entrant firms dynamically compete in their product offering and prices for their own profit maximization. The model allows us to analyze how incumbent’s cannibalization strategy influences equilibrium pricing and profits of both firms. In a certain condition, we find that incumbent’s profit-maximizing strategy is to raise the price of existing product and thus cannibalize the market share of existing product when the incumbent decides to compete with entrant by producing the similar quality product. In the same context, perhaps interesting finding is that the increased competition of higher quality product offering may paradoxically increase the equilibrium price but generate greater overall profit for the incumbent.

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