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Competing with co-created products

Cohen-Vernik, Dinah, Amit Pazgal and Niladri B. Syam

International Journal of Research in Marketing, 2019, vol. 36, issue 1, 63-82

Abstract: The practice of upstream firms (suppliers) and downstream firms co-creating products (goods or services) together has a long history in business markets. We analyze the strategic choices of two competing downstream firms who simultaneously decide whether or not to co-create with an upstream supplier. Within this framework we incorporate endogenous pricing and effort choices by the upstream supplier and the downstream firms. Downstream firms contemplating co-creation with a supplier are faced with a trade-off. On the one hand they can benefit from the supplier's innovation efforts and therefore obtain a better product. On the other hand, they are confronted with the adverse effect of their own innovation efforts spilling over to their rivals via the supplier who would sell the co-created product to all firms. Our model captures this tension and offers several insights.

Keywords: Co-creation; Competition; Customization; Spillovers; Game theory (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:ijrema:v:36:y:2019:i:1:p:63-82