Optimal timing decisions for the introduction of new technologies

The communications industry is a high-technology field that experiences frequent technological advances. Often, communications firms will gain access to new technologies before they have exhausted the capacity of existing facilities based on old technologies. Therefore, deciding when to introduce new facilities based on new technologies involves a tradeoff between the savings in operational costs to be achieved with the new technology and the fixed costs of new facility set-up. Optimal timing of new technology introductions is examined, with specific reference to the implementation of electronic plug-in units for communications facility operational enhancement. Initially, optimal timing decisions are investigated under linear demand, revealing that optimal timing will involve either immediate introduction of new technology, or postponement of introduction for as long as possible. Under nonlinear demand, neither immediate introduction nor prolonged postponement will be optimal. A simple method is provided for determining optimal timing decisions.