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Marketing Science
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Management Science
Customizing Promotions in Online Stores
Marketing Science
Quantifying the Economic Value of Warranties in the U.S. Server Market
Marketing Science
Product Differentiation, Store Differentiation, and Assortment Depth
Management Science
Standard vs. Custom Products: Variety, Lead Time, and Price Competition
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Optimal Algorithms for Assortment Selection Under Ranking-Based Consumer Choice Models
Manufacturing & Service Operations Management
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Firms often differentiate their product lines vertically to capture consumers differential willingness to pay for quality. Additionally, many firms offer products varying not in quality but in characteristics such as scent, color, or flavor, that relate to horizontal differentiation. For example, in the yogurt category, each manufacturer carries several product lines differing in quality and price, but within each line there is an assortment of flavors that is uniformly priced. To better understand these product-line pricing strategies, we address two key issues. First, how do consumers perceive product-line and flavor attributes? Second, given consumers preferences, is the current strategy of pricing product lines differently, but offering all flavors within a product line at the same price, optimal? We find that consumers value line attributes more than flavor attributes. Our analysis reveals that firms exploit these differences in consumer preferences by using product lines as a price discrimination tool. However, firms profits would not significantly increase if they were to price flavors within a product line differently. Therefore, the current pricing policy of setting different prices for product lines, but uniform prices for all flavors within a line, appears to be on target.