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Title: Service and price competition in a variety seeking market
Authors: Wei, Y
Xiong, L
Wang, Y 
Keywords: Differentiation
Variety seeking
Issue Date: 2015
Publisher: Institute of Electrical and Electronics Engineers Inc.
Source: 2015 12th International Conference on Service Systems and Service Management, ICSSSM 2015, 22-24 June 2015, 7170320 How to cite?
Abstract: We study service and pricing competition in a duopoly market where consumers are variety seeking, which is modeled as a decrease in the willingness to pay for the product purchased on the previous purchase occasion. Under a two-stage Hotelling-type model, we show that the presence of variety seeking consumers induces higher service levels in Period 2, if prices are committed at the beginning. The higher service in Period 2 represents the incentive that firms need to offer to prevent the variety seeking consumers from switching. Furthermore, if consumers on average have a higher propensity to one firm, the variety seeking behavior increases both the price and service gaps, thus to exaggerate market differentiation. In addition, variety seeking leads to higher total profits and a higher consumer surplus.
ISBN: 9781479983285
DOI: 10.1109/ICSSSM.2015.7170320
Appears in Collections:Conference Paper

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