Date of Award

5-2013

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Marketing

Advisor(s)

Tridib Mazumdar

Keywords

Event study, Firm value, Inter-temporal, Pricing, Product concept demonstration, Product differentiation

Subject Categories

Business

Abstract

I study the effects of product concept demonstrations on firm value and on firms' profit using two different methods: empirical and analytical approaches.

Utilizing an event study, in Essay 1, I assess the effects of product concept demonstrations in trade shows on abnormal stock returns and risks. My investigation has two interconnected parts: (1) analysis of the firms' decision on how many concepts to demonstrate and what would be the concept mix; and (2) analysis of investor reactions to the demonstration that influence the firm value and risk. I find that the number of concept demonstrations are influenced by the innovativeness of the concept mix, the demonstrating firms' past conversion history of concepts to commercialization, and the total number of concepts demonstrations, reflecting the size of the trade show. As a result, the concepts demonstrations for the first-time positively influence cumulative abnormal return, but the effects of demonstrating previously demonstrated concepts are negative.

In Essay 2, I develop a two-period game-theoretic model to analyze the intertemporal strategic interactions in a firms' pricing strategy for the old and new models with a product concept demonstration. My analysis provides new insights into the interplay of product positioning and a product concept demonstration that induces varying degrees of purchase delay while shaping the firms' dynamic pricing strategy. As a result, I find that a product concept demonstration can lower the new model price even below what it would be without a demonstration; further, I find that the volume of delayed purchases induced by a product concept demonstration is the greatest at very low or very high levels of product substitutability, exhibiting a U-shaped pattern. My findings suggest that differentiating the new model either horizontally or vertically is a critical factor for profitable pre-launch product concept demonstration. However, the mechanisms that lead to concept demonstration profitability are quite different between the two types of differentiation. Allowing various scenarios of product line and pricing policies, I find that the simpler pricing policy can dominate more complex pricing strategies.

Overall, the influences of the product concept demonstrations are researched through both empirical and analytical methods. The results of this dissertation suggest that innovative product concept demonstration generates positive firm value in the short run. Product concept demonstration also creates greater profit when the new product concept is either horizontally or vertically differentiated.

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Open Access

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