Pricing Strategies for Custom-Designed Product with Multiple Quality Levels

Abstract

A custom-designed item commonly involves a prepurchase entry fee as well as a purchase price. This paper consider a two-stage pricing strategies format, the firm decides to make a binding commitment to a second-stage price in which quality is privately assessed and evaluated by each consumer who entered in the first stage. With commitment, the two price points are strategic substitutes and the firm can improve profit.