2006), “On customized goods, standard goods, and competition

¶ Authors are listed in reverse alphabetic order; both authors contributed equally to the article. The usual disclaimer applies. The authors wish to thank Professors Jim Hess and Ram Rao for their valuable feedback. On Customized Goods, Standard Goods, and Competition In this research, we examine firms ’ incentives to offer customized products in addition to their standard products. In contrast, to extant work on product customization we allow the degree of customization to be a decision variable and allow the customized products to compete head-on. In such a context, we examine how the decision to offer customized products affects the competition between, and pricing of, firms ’ standard and customized products. We offer several key insights. First, we delineate market conditions that will (will not) induce firms to offer customized products in addition to their standard products. Customization benefits firms by expanding demand and by allowing them to mitigate the intensity of competition between standard products. Surprisingly, when firms offe