Mass customization in an endogenous-timing game with vertical differentiation

Oksana Loginova () and X. Wang ()

Economic Modelling, 2013, vol. 33, issue C, 164-173

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: Mass customization; Horizontal differentiation; Vertical differentiation; Endogenous timing (search for similar items in EconPapers)
JEL-codes: C72 D43 L13 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:33:y:2013:i:c:p:164-173

DOI: 10.1016/j.econmod.2013.03.011

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