Research Note: Overselling with Opportunistic Cancellations
Marketing Science
Modeling Consumer Demand for Variety
Marketing Science
Contingent Pricing to Reduce Price Risks
Marketing Science
Consumer Learning, Brand Loyalty, and Competition
Marketing Science
Product Strategy for Innovators in Markets with Network Effects
Marketing Science
Communication Strategies and Product Line Design
Marketing Science
Price Competition in Markets with Consumer Variety Seeking
Marketing Science
Product Variety and Endogenous Pricing with Evaluation Costs
Management Science
Service Cancellation and Competitive Refund Policy
Marketing Science
Strategic Entry Before Demand Takes Off
Management Science
The Benefits of Competitive Upward Channel Decentralization
Management Science
A generalized model of partial resale
Decision Support Systems
Vertical Differentiation with Variety-Seeking Consumers
Management Science
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When purchase and consumption decisions are separated in time and when future utility is state dependent, consumers may desire to pursue consumption flexibility by purchasing different products together (multiple buying). This paper analyzes the effects of consumption flexibility on competing firms marketing mix decisions, in a model in which future preference uncertainty exists and consumers differ in their preferred product location on a horizontal attribute. The analysis shows that the nature of price competition in such markets is dependent upon whether consumer multiple buying (and thus primary demand) is endogenously induced. When preference uncertainty is important, the firms are involved in a flexibility trap in which primary demand is expanded but profits decrease with the spread of consumer heterogeneity. This counter-intuitive result is caused by the firms being induced to over-cut prices to increase primary demand when consumption flexibility is important. In response to this, the firms may configure their products to alleviate the adverse effect of consumer heterogeneity. For example, if preference uncertainty is important, the firms may choose to minimize differentiation on the horizontal attribute, or extend the current product line, to deal with the flexibility trap. The implications of allowing for positive salvage value, uncertainty heterogeneity, preference correlation, and state-dependent preference configuration are also investigated.