Communication Strategies and Product Line Design
Marketing Science
Price as a Stimulus to Think: The Case for Willful Overpricing
Marketing Science
Buyer Search Costs and Endogenous Product Design
Marketing Science
Overchoice and Assortment Type: When and Why Variety Backfires
Marketing Science
Consumption Flexibility, Product Configuration, and Market Competition
Marketing Science
When More Alternatives Lead to Less Choice
Marketing Science
Self-Control and Incentives: An Analysis of Multiperiod Quota Plans
Marketing Science
Optimal Search for Product Information
Management Science
Consumer Deliberation and Product Line Design
Marketing Science
Consumer Fit Search, Retailer Shelf Layout, and Channel Interaction
Marketing Science
Product Line Design with Deliberation Costs: A Two-Stage Process
Decision Analysis
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One important decision firms must make is to select the product line (characteristics and number of products) to offer consumers. This paper explores the effect of the interaction between consumer evaluation costs and pricing on the optimal product line length to offer consumers. Before deciding to buy a product among all products offered, a consumer learns the product line length. Given the product line length, a consumer decides whether to evaluate the products available and their prices. This decision to evaluate depends on the expected consumer surplus after the evaluation being greater than the evaluation costs. When the firm offers few products, the firm may not attract many consumers because of lack of product fit and may be forced to offer low prices. When the firm offers many products, all consumers will find a great product fit; that is, the variance of consumer valuations per product chosen is lower. This allows the firm to charge high prices to extract ex post consumer surplus, resulting in lower ex ante expected consumer surplus, which may lead consumers not to evaluate the products in the first place. That is, by offering fewer products a firm can commit not to extract all possible consumer surplus. These two forces may then lead to the existence of an interior optimal number of products to offer. The optimal number of products offered is decreasing in the evaluation costs.