Correspondence: Hasan Arslan, Sawyer Business School, Suffolk University, Boston, Massachusetts 02108, USA. E-mail: harslan@suffolk.edu

¹is an assistant professor of Operations Management in the Sawyer Business School at Suffolk University. He holds a PhD in operations management from the MIT Sloan School of Management. He specializes in manufacturing systems, supply chains, service operations, and revenue management. His research has appeared in Management Science, IIE Transactions, and other journals.

²is an assistant professor of Industrial Engineering and Operations Research at Columbia University. He holds a PhD in operations research from the MIT Sloan School of Management. He specializes in dynamic pricing, revenue optimization, supply chain management, and transportation network management. He was honored in 2005 with the Columbia Engineering School Alumni Association Distinguished Faculty Teaching Award, and in 2007 with the Columbia Engineering School Kim Award for Faculty Involvement, an award that recognizes one faculty member who goes above and beyond the call of duty to foster student success.

³is an associate in the Credit Quant Analysis Group of the Fixed Income, Strategy and Analysis Division of Citigroup. He holds a PhD in Applied Mathematics from the Department of Applied Physics and Applied Mathematics of Columbia University.

Received 1 April 2007; Revised 1 April 2007; Published online 19 December 2008.

Abstract

We consider a firm's timing of new product introductions and pricing of multiple product generations. We analyse the case where a firm manages multiple generations of a product, and where demand of each generation is impacted by the prices of all existing generations and the introduction of new generations. In the case of two successive product generations, we provide closed-form expressions of the optimal product introduction time and optimal pricing strategies under two scenarios: the case of complete replacement of the base product by the new one, and the case of coexisting generations. We also extend our analysis and provide closed-form expressions to a duopoly environment for the complete replacement case. We believe our results are practical and can help firms better manage the product introduction and the life cycle pricing of multiple product generations.