Service and price competition in a variety seeking market

Ying Wei; Liyang Xiong; Yulan Wang

doi:10.1109/ICSSSM.2015.7170320

Service and price competition in a variety seeking market

Ying Wei, Liyang Xiong, Yulan Wang

Research output: Chapter in book / Conference proceeding › Conference article published in proceeding or book › Academic research › peer-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 language	English
Title of host publication	2015 12th International Conference on Service Systems and Service Management, ICSSSM 2015
Publisher	IEEE
ISBN (Electronic)	9781479983285
DOIs	https://doi.org/10.1109/ICSSSM.2015.7170320
Publication status	Published - 1 Jan 2015
Event	12th International Conference on Service Systems and Service Management, ICSSSM 2015 - Guangzhou, China Duration: 22 Jun 2015 → 24 Jun 2015

Conference

Conference	12th International Conference on Service Systems and Service Management, ICSSSM 2015
Country/Territory	China
City	Guangzhou
Period	22/06/15 → 24/06/15

Keywords

differentiation
pricing
service
variety seeking

ASJC Scopus subject areas

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

More information

10.1109/ICSSSM.2015.7170320

Cite this

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title = "Service and price competition in a variety seeking market",

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.",

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N2 - 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.

AB - 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.

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KW - pricing

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DO - 10.1109/ICSSSM.2015.7170320

M3 - Conference article published in proceeding or book

BT - 2015 12th International Conference on Service Systems and Service Management, ICSSSM 2015

PB - IEEE

T2 - 12th International Conference on Service Systems and Service Management, ICSSSM 2015

Y2 - 22 June 2015 through 24 June 2015

ER -

Service and price competition in a variety seeking market

Abstract

Conference

Keywords

ASJC Scopus subject areas

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