W e study a multi-product firm with limited capacity where the products are vertically (quality) differentiated and the customer base is heterogeneous in their valuation of quality. While the demand structure creates opportunities through proliferation, the firm should avoid cannibalization between its own products. Moreover, the oligopolistic market structure puts competitive pressure and limits the firm's market share. On the other hand, the firm has limited resources that cause a supply-side fight for adequate and profitable production. We explicitly characterize the conditions where each force dominates. Our focus is on understanding how capacity constraints and competition affect a firm's productmix decisions. We find that considering capacity constraints could significantly change traditional insights (that ignore capacity) related to product-line design and the role of competition therein. In particular, we show that when the resources are limited, the firm should offer only the product that has the highest margin per unit capacity. We find that this product could be the diametrically opposite product suggested by the existing literature. In addition, we show that for intermediate capacity levels, whereas the margin per unit capacity effect dominates in a less competitive market, proliferation and cannibalization effects dominate in a more competitive market.

C ompetition in the current marketplace requires businesses to provide consumers with the utmost convenience in purchasing services and goods. Buyers expect that, as an aftersales service and risk reliever, they can "return" goods if they are not satisfied with them. Such product returns significantly influence retailers' profits not only because of a reduction in net sales but also because of increased costs. Despite its substantial impact, research focused on retailer-consumer return policies has been limited. To fill this gap, we study a retailer that has to set the product return policy parameters-specifically, the price and the return period. The impact of these parameters on consumers' valuation function is also taken into account. We study the model analytically and provide insights through various numerical examples. We find that even with fraudulent consumers' negative effect on sales, a retailer could expect both its profits and prices to increase with an optimally determined return policy. We also find that a retailer that operates in an environment where consumers are not sensitive to return policies should be cautious when setting the return period.

B ecause of the interactive role employees play in service operations, their behaviors often affect the customer's experience directly. Employee behaviors, in turn, are often a function of the culture in which they are born and raised. To that end, it is critical to develop a national culture theory for service firms that need to operate in an increasingly global business environment and to study the extent of the impact of employees' national culture on a service firm's quality outcomes. Our review of the literature aims to increase the understanding of such links. We trace the impact of major cultural characteristics (adopted from the work of Geert Hofstede and the GLOBE project) on three dimensions of service operations: physical surroundings and products, employee behavioral aspects, and service supply chain operations. We also study the extent to which these relationships change in different segments of the same market. We develop a research framework, offer testable propositions for additional research, and identify future research directions to advance the field on these matters.

In this research note, we investigate segmentation opportunities for social planners such as government agencies, nonprofits, and public organizations. These opportunities arise when the potential products are vertically (quality) differentiated and the consumers are heterogeneous in their preferences toward quality. In these cases, whether to offer quality differentiated products and what quality level to choose are important decisions for a social planner. In this research note, we identify the conditions where it is socially optimal to offer either one homogenous or two quality differentiated products. We find that the resource limitations may result in a single product offering and that the quality of the product depends on the maximum surplus per unit resource consumed by the products. We also compare our findings to a profit-maximizing firm. We find that the resource limitations may cause a profit-maximizing firm to provide a better service to some consumers than the social planner. Contrary to common wisdom, we also show that the capacity limitations may force the social planner to act like a profit-maximizing firm in terms of its pricing and product mix choice.

F irms increasingly need to manage uncertainty and become more agile and adaptable. This study considers how a multi-product firm can use its product mix, resource capacity allocation, and pricing decisions to manage challenges such as structural economic shifts or changes in consumers' willingness-to-pay. Firms that seek to develop and use such a product line face a fundamental trade-off. On the one hand, multiple products compete for the demand externally (i.e., cannibalization effects), as well as for the limited resource capacity internally. On the other hand, a multi-product firm does have the ability to change the product mix and to adjust the production quantity and pricing of each product in order to manipulate supply and demand as conditions change. In this study, we demonstrate that a multi-product firm can become more agile and adaptable under consumer purchasing behavior uncertainty by employing postponement in product mix, quantity, and pricing decisions, and by allocating capacities appropriately. In particular, we show that a firm can use its product line flexibility to make strategic adjustments after understanding the realized economic conditions, and to decide whether to follow a focus or segmentation strategy. We also extend the model to look at the value of resource flexibility and find that it has little or no benefit above and beyond the product line flexibility studied here.