TAILIEUCHUNG - On Customized Goods, Standard Goods, and Competition¶

A literature review and web search were undertaken for all studied aspects of forest goods and services – their classification, characterisation, importance, trends, valuation, and the financing mechanisms for their provision. Concerning the classification and characterisation of non-market forest goods and services, various studies on terminology, classification and taxonomy of forest goods and services, as well as on the user groups, ownership structure and public access in the EU, were reviewed. The reviewed studies were mainly focusing on the EU scale (. MCPFE, COST E30 Action); however, where necessary other studies were also considered (. OECD, MEA, UNECE/FAO) | On Customized Goods Standard Goods and Competition Niladri B. Syam C. T. Bauer College of Business University of Houston 385 Melcher Hall Houston TX 77204 Email nbsyam@ Phone 713 743 4568 Fax 713 743 4572 Nanda Kumar The University of Texas at Dallas Email nkumar@ Phone 972 883 6426 Fax 972 883 6727 July 7 2005 1 Authors are listed in reverse alphabetic order both authors contributed equally to the article. The usual disclaimer applies. The authors wish to thank Professors Jim Hess and Ram Rao for their valuable feedback. On Customized Goods Standard Goods and Competition Abstract In this research we examine firms incentives to offer customized products in addition to their standard products. In contrast to extant work on product customization we allow the degree of customization to be a decision variable and allow the customized products to compete head-on. In such a context we examine how the decision to offer customized products affects the competition between and pricing of firms standard and customized products. We offer several key insights. First we delineate market conditions that will will not induce firms to offer customized products in addition to their standard products. Customization benefits firms by expanding demand and by allowing them to mitigate the intensity of competition between standard products. Surprisingly when firms offer customized products they can increase the prices of their standard products relative to when they do not . Second we find that when a firm offers customized products it is a dominant strategy for it to also offer its standard product. An important contribution of this research is to highlight the importance of standard products even when firms have customization capabilities. Third we investigate how market characteristics influence firms equilibrium customization strategies. Specifically we identify market conditions under which ex-ante symmetric firms will adopt symmetric or asymmetric customization .

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