Knowledge that Transforms

In this study, we consider the issue of preannouncing or not preannouncing the development of a new product. Our research is motivated by contrasting views in the literature and varying actions observed in practice. We develop and analyze a game theoretic model that examines the effect of a firm's preannouncement of its product development. Our model is based on a durable goods duopoly market with profit‐maximizing firms. The first firm is an innovator who initially begins developing the product; the second firm is an imitator that begins developing a competing product as soon as it becomes aware of the innovator's product. We assume that consumers are rationally expectant and purchase at most one unit of the product when they have maximum positive utility surplus that is determined by the characteristics of the product, the consumer's marginal utility, and the consumer's discounted utility for future expected products. The innovator firm can release information about its product when it begins developing the product or can guard information about its product until it introduces the product into the market. Our analysis and numerical tests show that, under some conditions, the innovator firm can benefit by preannouncing its product and giving the imitator firm additional time to differentiate its product. We discuss these conditions and their implications for new product development efforts.

Artemisinin combination therapy, the most effective malaria treatment today, is manufactured from an agriculturally derived starting material Artemisia annua. Artemisinin, the main ingredient in malaria medicines, is extracted from Artemisia leaves and used in the production of medicine for treating malaria. The artemisinin market has witnessed high volatility in the supply and price of artemisinin extract. A large fraction of malaria medicines for endemic countries in sub‐Saharan Africa is financed by the Global Fund to Fight AIDS, TB, and Malaria and the US President's Malaria Initiative. These agencies together with the World Health Organization, UNITAID, the United Kingdom Department for International Development and the Bill and Melinda Gates Foundation are exploring ways to increase the level of artemisinin production, reduce volatility of artemisinin prices, and improve overall access to malaria medicines for the population. We develop a model of the supply chain, calibrate the model using field data, and investigate the impact of various interventions. Our model shows that initiatives aimed at improving average yield, creating a support‐price for agricultural artemisinin, and a larger and carefully managed supply of semi‐synthetic artemisinin have the greatest potential for improving supply and reducing price volatility of artemisinin‐based malaria medicine.