Product Development and Market Expansion: A Valuation Approach Based on Real Options

Topics:
Marketing Strategy
Tags:
Business Operations,
Finance,
Investment,
Product,
Product Development,
Research & Development,
Social Science Electronic Publishing Inc.,
Valuation
Source:
Social Science Electronic Publishing

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Overview: In this paper we investigate the valuation and optimal timing for launching two complementary/substitute and correlated products (or projects), one of which is a pilot product. The model we introduce is designed to analyze the values of the pilot and the main product and the optimal investment policy as a function of the degree of complementarity/substitutability among the two products. The case is enriched by the presence of a patent on the key product and by the related consideration of a change in the competition and market structure due to patent expiry.

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Format: HTML | Date: Jan 2003 | Pages: 1

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