Markov Perfect Equilibrium in the US digital camera market

This paper examines the model launch and withdrawal decisions of the major digital camera makers for the period 1996-1999. These manufacturers produce differentiated products and some have the experience of participating in a similar market-the film camera market. This paper investigates to what extent the following four factors affect firms' decisions to launch a new model of digital camera: the effects of competition with “within-brand” models; the effects of competition with “cross-brand” models; the level of experience in the film camera market; and market conditions. The empirical findings suggest that good market conditions can accommodate more products, which has a positive effect on product launches. On the other hand, existing cross-brand models have a negative effect on product launches, while within-brand models and experience in similar markets have an ambiguous effect on product launches.