UCL School of Management

Research seminar

Influencing Adoption Patterns in High-Tech Supply Chains: The Effect of Price Flexibility


Wei Zhang, UCLA


Friday, 9 January 2015
15:00 – 16:30
Room G21a, Senate House, Malet Street, London WC1E 7HU

Influencing the pace of adoption is important for a seller that introduces a new, short-life-cycle technology in B2B markets. If buyers adopt too early, they face great demand uncertainty in B2C markets; if they adopt too late, they miss early sales. In either situation, buyers will pass on some of the costs through negotiations, resulting in less-than-optimal benefits to the seller. However, influencing the pace of adoption is difficult for a seller because buyer decisions are correlated by externalities such as seller’s cost learning and network effect among the buyers, which cause adoption rush or delay. Besides, in many B2B markets sellers cannot dictate the price over time to control adoption. We propose that sellers can influence and optimize buyer behaviour through the structure of contract i.e. fixed  or renegotiable-price and we support this by conducting both a causal analysis using data from the semiconductor industry and a theoretical analysis using a game-theoretic model. We find that fixed-price contracts lead to faster adoption in the microprocessor market. However, price flexibility in general can affect the pace of adoption in different ways, and the optimal contract choice depends on the strength of externality, strength of competition, bargaining power, and the number of buyers.

Open to
Executive Education: Project Management
All students
Last updated Wednesday, 7 January 2015