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Product Development Strategies and Price Dynamics: The Japanese Compact Digital Still Camera Insutry,1997-2005

Product Development Strategies and Price Dynamics: The Japanese Compact Digital Still Camera Insutry,1997-2005

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"Product Development Strategies and Price Dynamics: The Japanese Compact Digital Still Camera Insutry,1997-2005" (2008年6月)
 佐藤 英司(一橋大学大学院経済学研究科・競争政策研究センタースチューデントフェロー)
 松尾 健司(三菱重工業株式会社)
 Patricia Nelson (エジンバラ大学)
 岡田 羊祐(一橋大学大学院経済学研究科教授・競争政策研究センター主任研究官)
概要
 The Japanese compact digital still camera (hereafter DSC) industry successfully maintained its global competitiveness from 1997 to 2005. The salient characteristics of the industry are frequent introductions of new models and high initial market prices. These features are in stark contrast to other Japanese digital electronics industries such as flat panel displays which faced severe price pressures from global rivals. Using data on 562 compact DSC models introduced by 31 manufacturers over the years 1997 to 2005, we examine the relationship between new product development and transaction price at the time of the camera model’s introduction to the market. We pay particular attention to image resolution upgrades and rapid miniaturization. These two characteristics are the most conspicuous product development strategies in the Japanese DSC industry. We hypothesize that vertical differentiation of image resolution is the primary source of price dynamics in the late 1990s; an increase in the number of competing models drives down DSC prices. However, after 2001, price differentials are mainly explained by miniaturization with horizontal differentiation. Accordingly, an increase in the number of models competing horizontally produced by one manufacturer raises the price of a newlyintroduced high-end model significantly. We employ hedonic-type regressions with relevant explanatory variables for the product development strategies such as the firm’s product portfolio and the extent of vertical and/or horizontal product differentiation. Empirical results indicate that, while regular image resolution upgrades were the most important factor enabling high introductory prices in the late 1990s, rapid miniaturization with horizontal and vertical product differentiation became the key to understanding price dynamics in the 2000s. These findings indicate that it is very unlikely that “modularization” dictates the innovative pattern of the DSC industry. The main source of competitive advantage would arguably be the firm’s organizational capability to integrate swiftly into new models various technological advances, which allow firms to demand high introductory prices.
JEL classification codes: L63, O30
Keywords: digital still camera, product development, price dynamics, hedonic regression
CPDP
35-E(PDF:293KB)

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