Firms managing products across multiple generations face the challenge of timing the introduction of new product generations. Early introductions capitalize on the current willingness-to-pay of existing customers, but may also lead to a phenomenon called leapfrogging, i.e. customers skipping a generation. In addition, early introductions cannibalize the existing product in the market and are associated with high product development costs.
Based on individual replacement decisions, we develop a model to investigate the drivers of the optimal product introduction time. Our model predicts that firms which are able to reduce the effect technological progress by providing product upgrades or price reductions
can significantly shift the optimal product introduction time.