Consumer preference for product innovation/functionality has become increasingly diverse, therefore firms produce products with distinct versions/generations to satisfy consumers. This paper investigates the decision-making problem for multiple competitive firms considering consumers’ diversified preferences for product functionality. This paper develops an optimization model, in which the profit maximizing firms need to determine the production quantities of their products with different versions. Due to our model’s computational complexity, it motivates us to adopt variational inequalities theory, which is applied to convert an original model into a new variational inequality problem. On this basis, the existence and uniqueness of an equilibrium solution are proved, and a high-efficient Euler algorithm is proposed. A case study focused on the 5G smartphone market is conducted. Numerical results show that firms may obtain more profits by producing products with newer versions if the consumer preference for product functionality is high. However, if the preference level of consumer is under a certain level, it is not necessarily beneficial for firms who launch new versions of their products to the demand market. In addition, when the competition in market becomes intensive (due to new entrants), giving up the production of previous-version products may be more conducive to existing firms.
Keywords: Production strategies, product innovation, consumer preference, competition, Euler algorithm
@article{RO_2022__56_3_1335_0,
author = {Han, Xiaoya and Zhou, Yongyi and Liu, Xin},
title = {Optimal production strategies of competitive firms considering product innovation},
journal = {RAIRO. Operations Research},
pages = {1335--1352},
year = {2022},
publisher = {EDP-Sciences},
volume = {56},
number = {3},
doi = {10.1051/ro/2022057},
mrnumber = {4431925},
language = {en},
url = {https://www.numdam.org/articles/10.1051/ro/2022057/}
}
TY - JOUR AU - Han, Xiaoya AU - Zhou, Yongyi AU - Liu, Xin TI - Optimal production strategies of competitive firms considering product innovation JO - RAIRO. Operations Research PY - 2022 SP - 1335 EP - 1352 VL - 56 IS - 3 PB - EDP-Sciences UR - https://www.numdam.org/articles/10.1051/ro/2022057/ DO - 10.1051/ro/2022057 LA - en ID - RO_2022__56_3_1335_0 ER -
%0 Journal Article %A Han, Xiaoya %A Zhou, Yongyi %A Liu, Xin %T Optimal production strategies of competitive firms considering product innovation %J RAIRO. Operations Research %D 2022 %P 1335-1352 %V 56 %N 3 %I EDP-Sciences %U https://www.numdam.org/articles/10.1051/ro/2022057/ %R 10.1051/ro/2022057 %G en %F RO_2022__56_3_1335_0
Han, Xiaoya; Zhou, Yongyi; Liu, Xin. Optimal production strategies of competitive firms considering product innovation. RAIRO. Operations Research, Tome 56 (2022) no. 3, pp. 1335-1352. doi: 10.1051/ro/2022057
[1] Bendre, Oppo Find X2 Pro: Gorgeous display and versatile cameras, at a premium (2020). https://www.counterpointresearch.com/oppo-find-x2-pro-review-gorgeous-display-versatile-cameras-premium/.
[2] and , Quality in competitive fresh produce supply chains with application to farmers’ markets. Socio-Econ. Plan. Sci. 60 (2017) 62–76. | DOI
[3] , , and , Data-driven innovation to capture user-experience product design: An empirical study for notebook visual aesthetics design. Comput. Ind. Eng. 99 (2016) 162–173. | DOI
[4] Christo Petrov, Top R&D spenders: The biggest investors of 2020 (2020). https://spendmenot.com/top-rd-spenders/.
[5] Congressional Research Service, Global research and development expenditures: Fact sheet (2020) https://fas.org/sgp/crs/misc/R44283.pdf.
[6] and , Making Technology Work: Applications in Energy and the Environment. Cambridge University Press, Cambridge, UK (2004).
[7] , , and , A supply chain model with direct and retail channels. Eur. J. Oper. Res. 187 (2008) 691–718. | MR | Zbl | DOI
[8] , and , Innovation and competition in advanced therapy medicinal products. EMBO Mol. Med. 11 (2019) e9992. | DOI
[9] and , On the uniqueness and stability of Nash equilibria in noncooperative games. In: Applied Stochastic Control of Econometrics and Management Science, edited by , and . North-Holland, Amsterdam, The Netherlands (1980) 271–294. | MR | Zbl
[10] , and , R&D in the pharmaceutical industry: A world of small innovations. Manage. Sci. 55 (2009) 539–551. | DOI
[11] Gartner, Gartner says worldwide smartphone sales declined 5% in fourth quarter of 2020 (2021). https://www.gartner.com/en/newsroom/press-releases/2021-02-22-4q20-smartphone-market-share-release.
[12] , and , Product innovation in the Spanish auto market: Frontier shift and catching-up effects. Transp. Res. Part D: Transport Environ. 50 (2017) 170–181. | DOI
[13] , and , Innovation, new product development and internet technologies: Study in Brazilian companies. Gest. Prod. 26 (2019) e1451.
[14] , and , The impact of organizational legitimacy on product innovation: A comparison between new ventures and established firms. IEEE Trans. Eng. Manage. 66 (2019) 73–83. | DOI
[15] and , Equilibrium decisions for multi-firms considering consumer quality preference. Int. J. Prod. Econ. 227 (2020) 107688. | DOI
[16] , , , and , Innovation uncertainty, new product press timing and strategic consumers. Omega 89 (2019) 122–135. | DOI
[17] , , and , Innovative green product diffusion through word of mouth. Transp. Res. Part E: Logist. Transp. Rev. 134 (2020) 101833. | DOI
[18] and , Demand disruptions, pricing and production decisions in a closed-loop supply chain with technology licensing. J. Clean. Prod. 191 (2018) 248–260. | DOI
[19] La, 5G phones in 2020: Galaxy S20, OnePlus Nord, LG Velvet, Motorola Edge Plus and more (2020). https://www.cnet.com/news/best-5g-phones-in-2020-galaxy-s20-oneplus-nord-lg-velvet-motorola-edge-plus-and-more/.
[20] and , The effect of new product design and innovation on South Korean consumer’s willingness to buy. Asia Pac. J. Mark. Logist. 29 (2017) 98–113. | DOI
[21] and , Supply chain outsourcing under exchange rate risk and competition. Omega 39 (2011) 539–549. | DOI
[22] , and , Consumer environmental awareness and competition in two-stage supply chains. Eur. J. Oper. Res. 218 (2012) 602–613. | MR | Zbl | DOI
[23] , and , Optimal pricing strategy under trade-in program in the presence of strategic consumers. Omega 84 (2019) 1–17. | DOI
[24] , , and , Which group should governmental policies target? Effects of incentive policy for remanufacturing industry. RAIRO-Oper. Res. 55 (2021) 1579–1602. | MR | Zbl | Numdam | DOI
[25] , , and , A supply chain network economic model with time-based competition. Eur. J. Oper. Res. 280 (2020) 889–908. | MR | Zbl | DOI
[26] Malhotra, How will 5G affect mobile app development? (2019). https://www.forbes.com/sites/forbestechcouncil/2019/12/27/how-will-5g-affect-mobile-app-development/#401b73164baf.
[27] and , Effects of green innovation and advertisement in an imperfect production-based competitive supply chain under two-tier credit facility. Math. Methods Appl. Sci. 44 (2021) 13227–13251. | MR | Zbl | DOI
[28] and , Co-operative R&D: Why and with whom? An integrated framework of analysis. Res. Policy 32 (2003) 1481–1499. | DOI
[29] , , and , Multi-period planning of closed-loop supply chain with carbon policies under uncertainty. Transp. Res. Part D: Transp. Environ. 51 (2017) 146–172. | DOI
[30] and , Sustainable fashion supply chain management under oligopolistic competition and brand differentiation. Int. J. Prod. Econ. 135 (2012) 532–540. | DOI
[31] , and , A supply chain network equilibrium model. Transp. Res. Part E: Logist. Transp. Rev. 38 (2002) 281–303. | DOI
[32] Naiya, Consumers willing to spend 20% more on 5G smartphones (2019). https://www.counterpointresearch.com/consumers-willing-spend-20-5g-smartphones/.
[33] , Optimal production model with quality sensitive market demand, partial backlogging and permissible delay in payment. RAIRO-Oper. Res. 52 (2018) 499–512. | MR | Numdam | DOI
[34] and , Optimal strategies of a dual-channel green supply chain with recycling under retailer promotional effort. RAIRO-Oper. Res. 55 (2021) 415–431. | MR | Numdam | DOI
[35] , and , Two-echelon competitive integrated supply chain model with price and credit period dependent demand. Int. J. Syst. Sci. 47 (2016) 995–1007. | MR | DOI
[36] , , and , Personalization for massive product innovation using open architecture. Chin. J. Mech. Eng. 31 (2018) 34. | DOI
[37] and , Pricing and the news vendor problem: A review with extensions. Oper. Res. 47 (1999) 183–194. | Zbl | DOI
[38] , , and , Manufacturing practices and servitization: The role of mass customization and product innovation capabilities. Int. J. Prod. Econ. 228 (2020) 107747. | DOI
[39] R&D Coalition, Fact sheet-research and development by the numbers (2017). https://investinamericasfuture.org/fact-sheet-research-development-by-the-numbers/#::text=In%20the%20U.S.%20Economy&text=Overall%2C%20R%26D%20investments%20represent%20over,from%20private%20business%20R%26D%20investments.
[40] and , Competitive pricing strategies of multi channel supply chain under direct servicing by the manufacturer. RAIRO-Oper. Res. 55 (2021) 1849–1873. | MR | Zbl | Numdam | DOI
[41] and , Pricing and service strategies in a dual-channel supply chain under return-refund policy. Int. J. Syst. Sci.-Oper. Logist. (2021). DOI: . | DOI
[42] Sbeglia, Mobile operators are moving rapidly towards 5G deployment: Report (2020). https://www.rcrwireless.com/20200528/network-infrastructure/mobile-operators-5g-deployment.
[43] , , and , Dynamic innovation and pricing decisions in a supply-chain. Omega 103 (2021) 102423. | DOI
[44] , , and , Effects of sustainable design strategies on consumer preferences for redesigned packaging. J. Clean. Prod. 205 (2018) 854–865. | DOI
[45] and , Numerical approximation of a variational inequality related to the humid atmosphere. SIAM J. Numer. Anal. 55 (2017) 217–239. | MR | Zbl | DOI
[46] , , , and , The impact of cap-and-trade mechanism and consumers’ environmental preferences on a retailer-led supply chain. Resour. Conserv. Recycl. 142 (2019) 88–100. | DOI
[47] and , Supply chain disruption risk management through strategic information acquisition and sharing and risk-sharing contracts. Int. J. Prod. Res. 49 (2011) 4063–4084. | Zbl | DOI
[48] and , Dynamic pricing and competitive time-to-market strategy of new product launch under a multistage duopoly. Eur. J. Oper. Res. 277 (2019) 138–152. | MR | Zbl | DOI
[49] , , and , The impact of product uograding on the decision of entrance to a secondary market. Eur. J. Oper. Res. 252 (2016) 443–454. | MR | Zbl | DOI
[50] , and , On the relationship between innovation activity and manufacturing upgrading of emerging countries: Evidence from China. Sustainability 11 (2019) 1309. | DOI
[51] , Strategic product innovations and dynamic pricing models in oligopolistic market. J. Sci. Ind. Res. 76 (2017) 284–288.
[52] , , and , Dynamic channel decision-making of fresh agricultural product companies considering consumer convenience preferences. RAIRO-Oper. Res. 55 (2021) S1317–S1338. | MR | Zbl | Numdam | DOI
[53] , and , Generation of product innovation conceptual design schemes for considering the demand preferences of customers. Comput. Integr. Manuf. Syst. 21 (2015) 875–884.
[54] , and , The role of revenue sharing and first-mover advantage in emission abatement with carbon tax and consumer environmental awareness. Int. J. Prod. Econ. 193 (2017) 691–702. | DOI
[55] , and , Innovative artificial leather with high thermal conductivity as a new leather product. Text. Res. J. 87 (2017) 2487–2504. | DOI
[56] , Incentives for environmental research and development: Consumer preferences, competitive pressure and emissions taxation. Eur. J. Oper. Res. 276 (2019) 757–769. | MR | Zbl | DOI
[57] and , Competitive food supply chain networks with application to fresh produce. Eur. J. Oper. Res. 224 (2013) 273–282. | MR | Zbl | DOI
[58] , , and , Supply chain equilibrium among companies with offline and online selling channels. Int. J. Prod. Res. 53 (2015) 6672–6688. | DOI
[59] , and , The sustainable supply chain network competition with environmental tax policies. Int. J. Prod. Econ. 217 (2019) 218–231. | DOI
[60] , and , Strategic green technology innovation in a two-stage alliance: Vertical collaboration or co-development? Omega 98 (2021) 102116. | DOI
[61] , A network economic model for supply chain versus supply chain competition. Omega 34 (2006) 283–295. | DOI
[62] , and , A decision-making model for remanufacturers: Considering both consumers’ environmental preference and the government subsidy policy. Resour. Conserv. Recycl. 128 (2018) 176–186. | DOI
[63] , , and , Properties of the multiclass traffic network equilibria under a tradable credit scheme. Transp. Sci. 49 (2015) 519–534. | DOI
Cité par Sources :
