Capacity decisions for high-tech products with obsolescence |
| |
Authors: | Michael S Pangburn Shankar Sundaresan |
| |
Institution: | 1. Lundquist College of Business, University of Oregon, Eugene, OR 97403, United States;2. School of Business, Rutgers, The State University of New Jersey, Camden, NJ 08102, United States |
| |
Abstract: | Modern high-tech products experience rapid obsolescence. Capacity investments must be recouped during the brief product lifecycle, during which prices fall continuously. We employ a multiplicative demand model that incorporates price declines due to both market heterogeneity and product obsolescence, and study a monopolistic firm’s capacity decision. We investigate profit concavity, and characterize the structure of the optimal capacity solution. Moreover, for products with negligible variable costs, we identify two distinct strategies for capacity choice demarcated by an obsolescence rate threshold that relates both to market factors and capacity costs. Finally, we empirically test the demand model by analyzing shipping and pricing data from the PC microprocessor market. |
| |
Keywords: | Production Capacity Obsolescence Pricing Semiconductors |
本文献已被 ScienceDirect 等数据库收录! |
|