Mass Customization Enterprises’ Competitive Decisions Considering the Brand Effect

Abstract

Compared with mass production (MP), mass customization (MC) can cater to consumers' preferences better and seize market share, but it also leads to cost premium. Especially in the competitive market, companies should consider the MC capabilities of the rival company when making decisions. Based on the traditional MC decision model, this paper analyzes the impact of MC on consumer utility from the perspective of brand value by introducing the brand effect; and quantitatively measures the cost premium by introducing product line cost. Besides, this paper considers the market equilibrium of the target enterprises with MC capability when their rival enterprises have different customization capabilities and gives the decision-making situation of the enterprise under different situations in the context of the Cournot model. Finally, this paper compares the consumer surplus and social welfare under different equilibrium and analyzes the impact of MC. We find that if the target company has the customization ability, it will gain a competitive advantage, and even squeeze the market out when the rival company is unable to carry out MC; if both companies have MC capability, the two enterprises may fall into prisoners' dilemma; the choice of MC is not necessarily conducive to the increase of consumer surplus, and the competition between the two MC companies may even lead to lower social welfare.