Product Design with Multiple Quality-Type Attributes

Kilsun Kim () and Dilip Chhajed ()
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Dilip Chhajed: Department of Business Administration, University of Illinois at Urbana-Champaign, 1206 South Sixth Street, Champaign, Illinois 61820

Management Science, 2002, vol. 48, issue 11, 1502-1511

Abstract: We consider a product line design problem with multiple attributes for a monopolist serving a market with two customer segments. Products are designed with quality type attributes for which more is always better than less. By considering multiple attributes, we derive a measure of multidimensional customer preference and offer insights into the optimal product design. When customers'preferences exhibit different orders in different attributes, our results show that products are differentiated horizontally where no one product is better than the other with respect to all attributes, and that there exists a region where the first-best solution for the monopolist is feasible despite the problem of cannibalization. Furthermore, single-product offering strategies are never optimal, so pooling of customer segments or reduction of the number of segments served will not occur.

Keywords: Product Design; Multiattribute; Quality-Type Attribute; Continuous Optimization (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (42)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:48:y:2002:i:11:p:1502-1511

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