Optimal Product Line Design with Contextual and Temporal Price-Quality Effects - RMGS

Behavioral research suggests that consumers’ preferences between options are often dependent of the presence/absence of other options in a choice set. With choice-set dependent preferences, how should firms position a product line to discriminate consumers with heterogeneous valuations for quality? As simultaneous and sequential introductions have distinct implied choice-set configurations, should all available product options be introduced simultaneously or sequentially? How does context-dependent choice affect the distribution inefficiency caused by the cannibalization problem? This project will develop a theoretical model to address these questions.  Better grounded in psychological facts, the model will generate a more accurate guidance for efficient management of product lines.