Service and price competition in a variety seeking market

Ying Wei, Liyang Xiong, Yulan Wang

Research output: Chapter in book / Conference proceedingConference article published in proceeding or bookAcademic researchpeer-review

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.
Original languageEnglish
Title of host publication2015 12th International Conference on Service Systems and Service Management, ICSSSM 2015
PublisherIEEE
ISBN (Electronic)9781479983285
DOIs
Publication statusPublished - 1 Jan 2015
Event12th International Conference on Service Systems and Service Management, ICSSSM 2015 - Guangzhou, China
Duration: 22 Jun 201524 Jun 2015

Conference

Conference12th International Conference on Service Systems and Service Management, ICSSSM 2015
Country/TerritoryChina
CityGuangzhou
Period22/06/1524/06/15

Keywords

  • differentiation
  • pricing
  • service
  • variety seeking

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management
  • Management Science and Operations Research
  • Transportation

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