The impact of new product releases on established products

Many markets today are characterized by a fast evolving range of products, constantly pushing the technological boundaries to gain the upper hand when it comes to the latest, most modern product. But what happens to the products that are replaced? They don’t just disappear, but take a backseat in a firms offering. So how do their prices and sales quantities develop when faced with newer products? Previous literature either suggests that consumers have no real preference when it comes to ‘newness’ (Gruen, 1960) or that they do, with new offerings cannibalizing on earlier products of the same type (Haynes, Thompson, & Wright, 2014). In this paper we further explore the effects of new product introduction on prices and trading volumes of older products by analysing data gathered from the Steam community market, an online market place where people can buy and sell digital items. Our analysis shows that prices and trading volumes of older products are not influenced by the introduction of new products, with a significant relationship between introduction and price or trading volume only existing in about a quarter of the cases, suggesting that consumers on this market have no preference for newer products and the technological advantages that they offer. Another possible explanation could be that consumers value these goods purely for their aesthetic value. We also briefly explore the possibility of the betting community influencing prices but again find no compelling evidence.