Management Science
Product Line Design for a Distribution Channel
Marketing Science
Communication Strategies and Product Line Design
Marketing Science
Price as a Stimulus to Think: The Case for Willful Overpricing
Marketing Science
Buyer-Initiated vs. Seller-Initiated Information Revelation
Management Science
Barter Markets for Conjoint Analysis
Management Science
Product Variety and Endogenous Pricing with Evaluation Costs
Management Science
The Length of Product Line in Distribution Channels
Marketing Science
Information Acquisition and Sharing in a Vertical Relationship
Marketing Science
When More Alternatives Lead to Less Choice
Marketing Science
Why Are Bad Products So Hard to Kill?
Management Science
Product Line Design with Deliberation Costs: A Two-Stage Process
Decision Analysis
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This paper studies optimal product line design when consumers need to incur costly deliberation to uncover their valuations for quality. To induce deliberation, a firm must maintain quality dispersion and cut the price of the high-end product so that consumers are motivated to deliberate in the hope that high-end consumption fits their needs. To prevent deliberation, the firm may have to offer downgraded quality at a low price so that an impulsive purchase will not appear too wasteful. Whether the firm should induce deliberation depends on how much surplus it creates by aligning the supply of quality with heterogeneous demand for quality and how much surplus it captures during this process. Interestingly, equilibrium firm profit, consumer surplus, and social welfare can all increase with the cost of deliberation. We extend the model to accommodate consumers' heterogeneous prior beliefs of their valuations for quality. We also discuss how market research could benefit from taking into account the endogeneity of consumer deliberation.