Abstract: | Behavioral economics suggests that individuals may compare the options’ multiple attributes separately, and preferences between options are often dependent of the presence of other options or the specific choice context. When consumers exhibit context-dependent preferences, should competing firms change their product customization strategies? To address this question, we construct a theoretical model involving two firms, each offering a product which is potentially customizable. Specifically, the product is characterized by two non-price attributes. Each firm could choose whether and which attribute(s) to customize, leading to distinct product customization strategies: complete customization in which both firms customize on both attributes, partial customization on the same attribute, partial customization on different attributes, and no product customization where both firms offer only standard products. We consider a three-stage game. Firstly, the firms choose their product customization strategies simultaneously, which will become the common knowledge at the second stage where both firms simultaneously set their prices. Finally, customers choose whether and which product to buy from with context-dependent preference. We derive the equilibrium of such a game and discuss the results and implications. |
Date: | 17 August 2016 |
Time: | 10:00am - 10:30am |
Speaker: |
Ms Wang Qiao PhD Student Department of Management Sciences City University of Hong Kong |
Venue: | Room B5-122, 5/F, Academic 1, Blue Zone, City University of Hong Kong |
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