Product line design under capacity and competition Public Deposited

Downloadable Content

Download PDF
Last Modified
  • March 22, 2019
  • Yayla-Kullu, Hesna Muge
    • Affiliation: Kenan-Flagler Business School
  • Firms have long recognized the importance of quality based market segmentation and designed their product lines to make use of this phenomenon. However, product line decisions are traditionally made without regard to capacity limitations. It is usually ignored that a firm has limited resources for offering its products and needs to use these resources efficiently. This dissertation provides managerial insights by simultaneously studying the product line design problem and capacity limitations faced by the firms in a stylized two product setting. The optimal choice of product mix and pricing of these products when the products have different quality levels is a well-known problem. It has been studied extensively in both the marketing and economics literatures. However, the impact of capacity constraints has never been investigated in these literatures. On the other hand, the effects of product variety on operational decisions and how to mitigate these effects are fundamental questions in the operations literature. However, the effects of segmentation and cannibalization have not been understood well in the operations literature. This dissertation aims to fill these gaps in the literature. In the first essay, the problem is solved from a monopolist firm's point of view. This solution is compared to a socially efficient solution subject to capacity limitations. In the second essay, we introduce competition into the model. We characterize the solutions for both duopoly and oligopoly market structures. We investigate how competitor entry changes the optimal product mix, how industry supply and prices of products are affected when the number of competing firms changes, and how these results under capacity limitations are different from the existing literature. In the third essay, we study firms that have focused product line strategies. We derive the profitability limits of the focused strategy firms under both monopoly and duopoly settings where the competition may be asymmetric. In the fourth essay, we extend the monopoly model into a multiperiod setting and we study the effects of customer valuation uncertainty. We discuss how the results from the deterministic case compare to the stochastic case and how increasing uncertainty affects the firm's product line decisions.
Date of publication
Resource type
Rights statement
  • In Copyright
  • Swaminathan, Jayashankar M.
Degree granting institution
  • University of North Carolina at Chapel Hill
  • Open access

This work has no parents.