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Does competition lead to customization?

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  • Hsu, Wen-Tai
  • Lu, Yi
  • Ng, Travis

Abstract

This paper proposes a theory of competition and customization. When firms allocate their production to both custom-made and standardized products, the fraction of sales from the former will increase in the face of increased competition. Recent surveys conducted by the World Bank on Chinese firms provide a rare direct measure of customization that allows us to test the above-mentioned prediction. We find empirical results consistent with the prediction.

Suggested Citation

  • Hsu, Wen-Tai & Lu, Yi & Ng, Travis, 2014. "Does competition lead to customization?," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 10-28.
    • Handle: RePEc:eee:jeborg:v:106:y:2014:i:c:p:10-28
    DOI: 10.1016/j.jebo.2014.05.011
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    Cited by:

    1. Pak Hung Au & Xiaoping Chen, 2019. "A Model of Trade with Endogenous Product Design," HKUST CEP Working Papers Series 201901, HKUST Center for Economic Policy.
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    3. Na Liu & Pui-Sze Chow & Hongshan Zhao, 2020. "Challenges and critical successful factors for apparel mass customization operations: recent development and case study," Annals of Operations Research, Springer, vol. 291(1), pages 531-563, August.
    4. Ajay Bhaskarabhatla, 2016. "The Moderating Role of Submarket Dynamics on the Product Customization–Firm Survival Relationship," Organization Science, INFORMS, vol. 27(4), pages 1049-1064, August.

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    More about this item

    Keywords

    Customization; Competition; Manufacturing; Spatialcompetition;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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