By Carlos Hernandez Mireles
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2) we extend the model to the triopoly case. Both extensions are based on the same assumptions and we present the duopoly case first for ease of exposition. 3). 4) we present the intuition and the analytical properties that make our specification suitable to optimize and study the launch timing of new dominant technologies. 1 Duopoly Multi-Generation Model In order to expand the Norton and Bass (1987) model and add a second firm or a second competing product, we should make assumptions about the relationship between the firms’ products.
The ratio increases in a similar way when the alpha of Nintendo is higher. Earlier we concluded that the imitation strategy is the worst among the four strategies we evaluated for Sony. However, if Sony had superior products the imitation strategy may yield high sales, see how the log ratio goes up to -3 and -2 in the left-most and center upper panel graphs. This is evidence supporting Lemma 2. However, we can easily notice that despite the unifying message the surfaces have different slopes. That is, achieving higher sales by raising or decreasing each of the φ parameters does not yield the same increase/decrease in expected sales.
That is, our data covers a period of almost 9 years and 10 systems. Before we plug our data into the estimation routines we control for indirect network effects, seasonality and price. It has been documented that indirect network effects might play a role in the video game market (see for example, Chintagunta et al. (2009), Clements and Ohashi (2005) or Shankar and Bayus (2003)). Furthermore, Binken and Stremersch (2009) show that 24 The Launch Timing of New and Dominant Multi-Generation Technologies it is mainly super star software what drives indirect network effects in the video game systems market.