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Demonstrations and Price Competition in New Product Release

Haresh Gurnani
Benson-Pruitt Professor of Business
Director of Undergraduate Math Business Program
Wake Forest University
Friday, March 3, 2017   2:30-3:30pm
JDT 410

Abstract

We incorporate product demonstrations into a game theoretic model of price competition. Demonstrations may include product samples, trials, return policies, online review platforms, or any other means by which a firm allows consumers to learn about their value for a new product. In our model, demonstrations help individual consumers learn whether they prefer an innovative product over an established alternative. The innovative firm controls demonstration informativeness. When the innovative firm commits to demonstration policies and there is flexibility in prices, the firm is best off offering fully informative demonstrations which divide the market and dampen price competition. In contrast, when a firm can adjust its demonstration strategy in response to prices, the firm prefers only partially informative demonstrations, designed to maximize its market share. Such a strategy can generate the monopoly profit for the innovative firm. We contrast the strategic role of demonstrations in our framework with the strategic role of capacity limits in models of judo economics (e.g. Gelman and Salop 1983), which also allow firms to divide a market and reduce competition.

Bio

Haresh Gurnani is Benson-Pruitt Professor of Business, Area Chair of Quant Methods/Analytics, Operations Management, Marketing, and Economics areas, Executive Director of the Center for Retail Innovation, and Director of the Undergraduate Math Business program at Wake Forest University. He was previously Leslie O Barnes Professor in the Department of Management at the University of Miami, Coral Gables where he served as Chair of the Management Department and on the University’s Research Council, Graduate Council and the Provost’s University-wide Advisory Promotion Board.

He has received several research and teaching awards, including The William W. Cooper Award for the Best Doctoral Dissertation in the area of Business and Economics, The William Larimer Fellowship, and Richard M. Cyert Fellowship nomination at Carnegie Mellon University, Cowan Faculty Research award at Wake Forest University, the University of Miami Excellence in Teaching nomination, Best Professor of Management award from the World Education Congress, the Michael G. Dale Prize nomination for Teaching and the Franklin Prize for Teaching Excellence at the Hong Kong University of Science and Technology. In 2015, two of his papers (published in Management Science and IIE Transactions) received the best paper award sponsored by M&SOM Society at INFORMS, and by IIE Society, respectively.

He has served on review panels for the National Science Foundation, the Department of Homeland Security, and on multiple journal editorial boards. He is the founding Department Editor at Production and Operations Management Journal in the interface area of Operations-Economics, and previously served as Senior Editor where he co-edited a special issue on Global Supply Chain Risk Management. He also serves as Guest Associate Editor at Manufacturing & Service Operations Management, Senior Editor at Decision Sciences, Editorial Board Member at Journal of Retailing, and has previously served as Area Editor at IIE Transactions. He serves as Vice-President (Publications) for Production and Operations Management Society, and has previously served as Vice-President (Colleges). He has co-edited a book on Supply Chain Disruptions: Theory and Practice of Managing Risk, published by Springer-Verlag (London) in 2011. His articles have been accepted in journals such as Management Science, Marketing Science, Journal of Marketing Research, Manufacturing and Service Operations Management, Production and Operations Management, Journal of International Business Studies, Naval Research Logistics, IIE Transactions, Decision Sciences, Journal of Retailing, IEEE Transactions on Semiconductor Manufacturing, European Journal of Operational Research, etc. He has interacted extensively on research and training programs in different industries, including those corporations such as IBM, AT&T, General Motors, Lowes Foods, Covidien, Burger King, Texas Instruments, Westrock, Food Lion, INMAR, and Bellomy Research, along with various Asian companies.

Haresh received his B.Tech. (Mechanical Engineering) from the Indian Institute of Technology,

New Delhi, and the M.S. and Ph.D. from Carnegie Mellon University, Pittsburgh, USA. He is a member of INFORMS, Production and Operations Management Society, the Manufacturing & Service Operations Management Society, and the Council for Supply Chain Management Professionals.

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