We consider a capital accumulating incumbent firm which produces an

established product and has the option to introduce an improved substitute

product to the market by incurring adoption costs. We find that depending

on the initial capacities on the established market and the value of adoption

costs, three scenarios are possible, namely introducing immediately,

later or abstaining from product introduction. In case of delay of product

introduction, the incumbent reduces capacities for the established product

before the new product is introduced. We encounter Skiba points where

the incumbent is indifferent between two of the three scenarios and use a

bifurcation analysis in order to characterize the transition towards different

steady states.