Research article of Global journal of Economics and Business Administration
Firm Utilization of Perceived Obsolescence
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
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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