The purpose of this paper is to demonstrate how consumers choose among three different options offered by a firm in a monopolistic setting, namely, to buy a standard product with a non-customizable design, to ask the firm to customize a product using the consumer’s ideal design or to do the entire design task by themselves. The authors also investigate how social preference intensity and the possibility of reselling a product influence a consumer’s decision.
The authors develop an analytical (game theoretical) consumer choice framework and incorporate a psychological factor into the model. The authors also empirically validate the analytical findings using simulations.
The authors find that as social preference intensity increases, the number of co-producers can either decrease or increase. The authors offer a closed-form solution and interval graphs showing that when the setup price is large (small), the proportion of the market that chooses to do-it-yourself (DIY) is large (small) and an increase in social preference intensity leads to a decrease (increase) in co-production.
This is the first paper to incorporate a social factor into an economic model in a consumer behavior setting. It is also the first paper to explain how customers’ preferences among possible options, such as DIY (without the firm’s help), co-production (with the firm’s help) and a standard product might change while considering other people’s preferences, as well as given associated costs.
All authors contributed equally to the manuscript.
Dargahi, R., Namin, A. and Ketron, S. (2021), "Co-production or DIY: an analytical model of consumer choice and social preferences", Journal of Product & Brand Management, Vol. 30 No. 2, pp. 306-319. https://doi.org/10.1108/JPBM-09-2019-2565
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