Essays on Product Variety in Retail Operations

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Date

2019-09-18

Authors

Yazdani, Alireza

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Volume Title

Publisher

University of Oregon

Abstract

Thanks to technological advances in the past few decades, firms find product variety a more viable and hopefully a more profitable strategy than before. In this two-essay dissertation, I employ analytical models to investigate the effects of emerging operations concerning product variety on firm profits and consumer surplus. In my first essay, I analyze a two-stage game to study product-design and price competition between two mass-customizing firms that serve consumers with varying tastes. By comparing equilibrium results in settings with and without mass customization, I establish that competition with customization may lead to lower profits and consumer surplus. In my second essay, I study sample boxes which potentially create value by helping consumers resolve their uncertainties regarding different product varieties more efficiently. I show that when a firm offers a sample box, consumers obtain equal or higher net expected surplus while the firm's expected profit may decrease. I also show that a firm can reverse the potential adverse profit impact of selling sample boxes by introducing an optimally specified future credit. This dissertation includes previously unpublished co-authored material.

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Keywords

Mass Customization, Product Variety, Retail Operations Management, Sample Box

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