{"title":"Free Add-Ons in Services","authors":"P. Gao, XingYu Fu, Haoyu Liu, Ying‐ju Chen","doi":"10.1287/serv.2022.0307","DOIUrl":null,"url":null,"abstract":"The paper examines a seller’s offering of free add-ons in services. We build a stylized model where the seller decides the level of add-on provision to enhance its core service, and consumers make discrete choices between the seller and an outside option. When the seller supplies its service through a single channel, we show that the optimal add-on provision is unimodal in the difference between the seller’s service quality and the outside option, comparable with the existing literature. When the service is supplied through multiple channels, we show that the seller may make nonidentical add-on provisions among channels. If the cost of add-on provision is low, the seller should adopt a differentiation strategy. If the cost is high, the seller should adopt a homogenization strategy. Various extensions are considered to establish the robustness of our results.","PeriodicalId":1,"journal":{"name":"Accounts of Chemical Research","volume":null,"pages":null},"PeriodicalIF":16.4000,"publicationDate":"2022-08-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Accounts of Chemical Research","FirstCategoryId":"91","ListUrlMain":"https://doi.org/10.1287/serv.2022.0307","RegionNum":1,"RegionCategory":"化学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"CHEMISTRY, MULTIDISCIPLINARY","Score":null,"Total":0}
引用次数: 0
Abstract
The paper examines a seller’s offering of free add-ons in services. We build a stylized model where the seller decides the level of add-on provision to enhance its core service, and consumers make discrete choices between the seller and an outside option. When the seller supplies its service through a single channel, we show that the optimal add-on provision is unimodal in the difference between the seller’s service quality and the outside option, comparable with the existing literature. When the service is supplied through multiple channels, we show that the seller may make nonidentical add-on provisions among channels. If the cost of add-on provision is low, the seller should adopt a differentiation strategy. If the cost is high, the seller should adopt a homogenization strategy. Various extensions are considered to establish the robustness of our results.
期刊介绍:
Accounts of Chemical Research presents short, concise and critical articles offering easy-to-read overviews of basic research and applications in all areas of chemistry and biochemistry. These short reviews focus on research from the author’s own laboratory and are designed to teach the reader about a research project. In addition, Accounts of Chemical Research publishes commentaries that give an informed opinion on a current research problem. Special Issues online are devoted to a single topic of unusual activity and significance.
Accounts of Chemical Research replaces the traditional article abstract with an article "Conspectus." These entries synopsize the research affording the reader a closer look at the content and significance of an article. Through this provision of a more detailed description of the article contents, the Conspectus enhances the article's discoverability by search engines and the exposure for the research.