Entry-Level Products with Consumer Learning

Dynamic motivations for the use of product line extensions in the form of entry-level products are considered. When consumers are uncertain of their valuations for products, and their purchasing power evolves over time, firms competing in a lucrative luxury market may try to influence the future buying decisions of young consumers. Offering entry-level products allows young consumers to experiment and thereby make better future decisions. Despite this efficiency, so providing information to consumers need not benefit a firm. The dynamic motivations for offensive product introductions differ discretely from defensive introductions.