514 / 2024-04-25 18:05:08

Customization and bargaining: When should a seller offer both?

Nash bargaining,Retailing,Product customization,Consumer expertise,Game theory

Product customization has gained popularity among both consumers and sellers. More and more sellers utilize the advantage of livestreaming platforms to offer customized products to consumers and allow them to bargain at the same time. However, the two research streams on product customization and bargaining seldom intersect, although being studied separately in literature. To explain this increasing trend, we investigate a seller's strategic decisions on both customization and bargaining, while considering the impact of consumer expertise on the product. We find that the seller benefits from offering customized products along engaging in bargaining when the level of consumer expertise is moderate. Second, in contrast to the conventional wisdom that consumers may benefit from their higher expertise, our results indicate that the high consumer expertise may backfire on consumers. Third, the seller does (does not) engage in consumer bargaining when the consumer expertise is low (high). In other words, the seller uses the bargaining strategy in response to the consumers’ expertise. This analysis provides insights into the increasing trend of sellers offering customized products and allowing consumers to bargain, highlighting the delicate balance that sellers navigate in response to varying levels of consumer expertise.