Brand familiarity and product knowledge in customization |
| |
Authors: | Oksana Loginova |
| |
Affiliation: | Department of Economics, University of Missouri‐Columbia, Columbia, USA. Email: loginovao@missouri.edu |
| |
Abstract: | I adopt Hotelling's model with two firms. Each consumer has a most preferred variety and possesses a certain level of category‐specific knowledge. When a firm offers customization, consumers must interact with the firm to create their products. Consumers familiar with the brand can do this seamlessly, whereas consumers unfamiliar with the brand have difficulty expressing their individual needs (the difficulty decreases with consumers' knowledge). The firms first simultaneously decide whether to customize, then engage in price competition. Although customization makes the products less differentiated, the frictions caused by consumer co‐design activities relax price competition. Customization by one of the firms occurs in equilibrium. |
| |
Keywords: | horizontal differentiation price competition customization brand familiarity product knowledge D43 L13 C72 |
|
|