To learn the uncertainty of customer preference on the attribute of new product, usually a firm needs to do market research. Developing a product on an attribute which is less preferred by customer may lead to a failure. In addition, a firm used to take efforts to design the product. In recent years, we observed a new business model in which the firm does not take effort to design new product, nor does she do market research by herself. She provides rewards to attract outside designers to design new product. Some designers may take effort and design products based on their private information of customer preference. The firm receives designs with different quality and attribute, she chooses one to produce. By solving this game model, we get the equilibrium quality of the design offered by each designer based on their private cost parameter. And we obtain the following insights: When the market size is too small, the firm gives nothing to designers; when the market size is sufficiently big, the firm only gives reward to the designer whose design is produced; otherwise the firm gives both rewards to participated designers and the designer whose design is produced. We find that when the market size is big enough or the disutility is high enough, the new business model dominates the benchmark business model. When both the disutility and market size are small enough, the firm prefers the benchmark business model. And the relative attractiveness of new business model versus benchmark model keeps the same when the market size is small enough. The impact of extra reward on relative attractiveness of new business model versus benchmark model increases with extra reward. When the extra reward is high enough, the firm always prefers the new business model.
|Date of Award||2015|
- Department of Computing and Decision Sciences
|Supervisor||Weixin SHANG (Supervisor) & Liming LIU (Supervisor)|