This analysis is inspired by a weird phenomenon in the sportswear industry, where firms sell “limited” edition products at a fixed price with limited quantities, together with a general release of the “same” product. The secondary market prices of those “limited” editions are much higher than the primary market. This paper tries to use a simple model in order to explain why brands may use “limited” editions as a strategy in their marketing in the primary market. Using the simple model, we see that by releasing the “limited” edition alongside with the “general” edition while keeping the price the same, the firm will gain additional profits due to the additional demand. This may explain firm’s motive of introducing “limited” edition releases instead of creating a new product as the cost of innovation may offset the additional profit had they introduced a completely new product.
Draft available upon request.