Market-Based Strategic Platform Design for a Product Family Using a Bayesian Game

Abstract

Mass customization depends on a company’s ability to provide customized products or services based on economical and flexible development and production systems. Product family design provides a way to achieve cost-effective mass customization by allowing highly differentiated products to be developed from a common platform while targeting products to distinct market segments. In dynamic and uncertain market environments, however, we only have incomplete or uncertain information regarding market trends, customer’s preferences, production costs, and the company’s strategies for product development. The objective of this paper is to propose a methodology for strategic platform design in a product family using concepts from game theory to model the situations of uncertain market environments. We identify module-based platform design for a product family and consider a module selection problem as a strategic game with incomplete information. In particular, a Bayesian game is employed to model uncertainty situations regarding market environments. The proposed Bayesian game is used to decide strategic equilibrium solutions for selecting modules in the product family being designed. To demonstrate implementation of the proposed Bayesian game, we use a case study involving a family of power tools.