Customization in an Endogenous-Timing Game with Vertical Differentiation

Oksana Loginova () and X. Wang ()
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Oksana Loginova: Department of Economics, University of Missouri, https://economics.missouri.edu/people/loginova

No 1304, Working Papers from Department of Economics, University of Missouri

Abstract: We study mass customization in a duopoly game in which the firms' products have different qualities. Whether customization choices are made simultaneously or sequentially is endogenously determined. Specifically, the customization stage of the game involves two periods. Each firm either selects its product type in period 1 or postpones this decision to period 2. We show that customization by one or both firms occurs only if the quality difference is sufficiently large. Flexibility of timing in the customization stage sometimes enables the firms to achieve an outcome that is Pareto superior to that if they were constrained to simultaneous customization choices. Although the high quality firm is more likely to customize, in some circumstances the low quality firm can obtain an advantage by becoming the first and only firm to adopt customization.

Keywords: customization; horizontal differentiation; vertical differentiation; endogenous timing (search for similar items in EconPapers)
JEL-codes: C72 D43 L13 (search for similar items in EconPapers)
Pages: 28
Date: 2013-03-05
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (2)

Published in Economic Modelling 2013

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Related works:
Working Paper: Customization in an Endogenous-Timing Game with Vertical Differentiation (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:1304

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