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Market Segmentation, Self-Selection, and Product Line Design

Market Segmentation, Self-Selection, and Product Line Design The purpose of this paper is to develop a theory of market segmentation based on consumer self-selection. The extant theory is based on the third-degree price discrimination model of Pigou, central assumptions of which are that the firm can directly address individual segments and isolate them. By using consumer self-selection, I am relaxing these assumptions. In the context of a monopolist designing a product line, I show that this relaxation has significant implications for how the products and prices are chosen and what they look like. In particular, segments may be aggregated even though there are no economies of scale. Furthermore, consumer self-selection enables us to model cannibalization and competition among firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Marketing Science INFORMS

Market Segmentation, Self-Selection, and Product Line Design

Moorthy, K. Sridhar
Marketing Science , Volume 3 (4): 20 – Nov 1, 1984
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References (21)

Publisher
INFORMS
Copyright
Copyright © INFORMS
Subject
Research Article
ISSN
0732-2399
eISSN
1526-548X
DOI
10.1287/mksc.3.4.288
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to develop a theory of market segmentation based on consumer self-selection. The extant theory is based on the third-degree price discrimination model of Pigou, central assumptions of which are that the firm can directly address individual segments and isolate them. By using consumer self-selection, I am relaxing these assumptions. In the context of a monopolist designing a product line, I show that this relaxation has significant implications for how the products and prices are chosen and what they look like. In particular, segments may be aggregated even though there are no economies of scale. Furthermore, consumer self-selection enables us to model cannibalization and competition among firms.

Journal

Marketing Science – INFORMS

Published: Nov 1, 1984

Keywords: Keywords : market segmentation ; self-selection ; aggregation of segments ; product line design

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