International Transactions in Operational Research

Balancing product differentiation and cost saving in the presence of consumer deliberation

Early View

Abstract This paper investigates the manufacturer's optimal product line design under different production strategies when customers with different preference structures (dominating or nondominating) need to incur the deliberation cost to uncover customers' valuations of product quality. We characterize the optimal price, quality, and profit under different production strategies and preference structures. Our results demonstrate that the optimal product line under both production strategies is threshold‐controlled, and there exists a deliberation cost threshold, below which the manufacturer provides efficient quality for high‐valuation customers and distorts the quality of low‐end products, while above such a threshold, the manufacturer increases the quality dispersion between high‐end and low‐end products. We also find that the adoption of commonality will increase the manufacturer's profit only if the cost‐saving effect is relatively significant. Contrary to the existing literature, we finally reveal that commonality can reduce cannibalization in the nondominating preference structure scenario if the deliberation cost is low and the cost‐saving effect is strong or if the deliberation cost is sufficiently high.

Related Topics

Related Publications

Related Content

Site Footer


This website is provided by John Wiley & Sons Limited, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ (Company No: 00641132, VAT No: 376766987)

Published features on are checked for statistical accuracy by a panel from the European Network for Business and Industrial Statistics (ENBIS)   to whom Wiley and express their gratitude. This panel are: Ron Kenett, David Steinberg, Shirley Coleman, Irena Ograjenšek, Fabrizio Ruggeri, Rainer Göb, Philippe Castagliola, Xavier Tort-Martorell, Bart De Ketelaere, Antonio Pievatolo, Martina Vandebroek, Lance Mitchell, Gilbert Saporta, Helmut Waldl and Stelios Psarakis.