Firm Utilization of Perceived Obsolescence


Firm Utilization of Perceived Obsolescence


Ace Kim

Northern Valley Regional High School at Old Tappan


Perceived obsolescence has been displayed experimentally in many situations, but remains understudied theoretically. We develop a model of consumer demand, where firms aim to maximize their profit from consumers who enjoy network benefits from updated products. Firms face two key choices, pricing and whether to obsolete their product through introducing a new mod-el. In this paper, we demonstrate that perceived obsolescence can be an effective strategy for firms, but must be employed with caution. We then use our findings to derive several testable implications that enable businesses to determine for themselves whether perceived obsolescence can be a viable strategy for them. In particular, we categorize the key differences in optimal strategies between firms that sell products with network benefits, such as social media products, as opposed to those that sell status symbols, such as watches.


Keywords: Firm Utilization; Perceived Obsolescence


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How to cite this article:
Ace Kim. Firm Utilization of Perceived Obsolescence. Global journal of Economics and Business Administration, 2021, 6:36. DOI:10.28933/gjeba-2021-09-1605


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