Product Design with Multiple Quality-Type Attributes

Abstract

We consider a product line design problem with multiple attributes for a monopolist serving a market with two customer segments. Products are designed with quality type attributes for which more is always better than less. By considering multiple attributes, we derive a measure of multidimensional customer preference and offer insights into the optimal product design. When customers'preferences exhibit different orders in different attributes, our results show that products are differentiated horizontally where no one product is better than the other with respect to all attributes, and that there exists a region where the first-best solution for the monopolist is feasible despite the problem of cannibalization. Furthermore, single-product offering strategies are never optimal, so pooling of customer segments or reduction of the number of segments served will not occur.Product Design, Multiattribute, Quality-Type Attribute, Continuous Optimization

Managing new and differentiated remanufactured products

“…Moorthy and Png (1992), Kim and Chhajed (2002), and Krishnan and Zhu (2006) develop qualitybased models for new product development with multiple market segments under different marketing and manufacturing considerations. Desai et al (2002) study the coordination problem between manufacturer and retailer of durable products which arises from the potential competition from a secondary market in future periods.…”

Selecting a Customization Strategy Under Competition: Mass Customization, Targeted Mass Customization, and Product Proliferation

“…Since product line design strategies affect firms' decisions on production and marketing-mix elements, such as pricing and distribution channels, management of product variety has received great emphasis in the marketing, economics, and operations literature [31], [34]. The following paragraphs summarize the existing literature from these streams.…”

Product Line Selection and Pricing with Modularity in Design

“…Kim and Chhajed (2002) consider a product line design model in which a monopolist offers two multiattribute products to serve a market with two customer segments. Both papers involve only two products and are therefore limited with respect to what they can say about the importance of modularity.…”