Repeat Purchase Decisions under Sequential Innovation
نویسنده
چکیده
Improving technologies create a “buy or wait?” dilemma. In this paper, we consider repeat purchases when the consumer faces an infinite stream of new technologies. We develop a probabilistic model and focus on the role of “more variability” on the process of technological innovation. Similar to real options models, we find that variability in the technological process increases value for the consumer. Unlike other results we have seen, more variability lowers the optimal threshold. Using the monotonicity of the strategy in variability, we derive upper and lower bounds on the critical threshold. JEL Classifications: D80, D92, O33
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