Valuation of New Products in Attribute Space

We contribute to the literature on new product valuation by presenting a model of new product introduction based on the distance metric (DM) approach of <xref ref-type="bibr" rid="R32">Pinkse, Slade, and Brett (2002)</xref>. Models based on the DM approach are capable of dealing with highly differentiated food categories that are often responsible for the lion’s share of new product activity. Furthermore, since new products are typically characterized by differences in observable attributes, the DM approach is appropriate in that it directly accounts for such differences. Our findings reveal that consumers benefit from new products even when the number of alternatives is already high. Copyright 2007, Oxford University Press.