Optimal Strategies of Customization and Information Sharing in the Presence of Feature Creep

Abstract

Feature creep captures the phenomenon that additional features result in product complexity and even decrease the usability of products. According to consumers’ heterogeneous tastes for products’ sophisticated features, we divide them into the low-end segment and the high-end segment. The proportions of the two segments are uninformed as to the manufacturer, but known to the platform. We take into account feature creep, and consider a supply chain consisting of a manufacturer and a platform. The manufacturer decides whether to adopt customization strategy, and the platform decides whether to share its private information. By formulating several sequential game models, we explore both firms’ optimal strategies and then examine the impacts of customization production and information sharing on environmental performance. Our findings reveal that adopting customization strategy can drive the manufacturer to improve its innovation efforts and raise the wholesale price. Additionally, if the low-end consumers’ proportion exceeds the manufacturer’s expectations, this improvement can be enhanced when the platform shares its private information, and vice versa. Furthermore, if the cost that the manufacturer takes to embed various functions in the product is quite small, it is environmentally friendly for the manufacturer to adopt customization strategy. While, if the cost is relatively large, taking customization strategy causes even greater negative effects on the environment. In addition to generating higher profits for both parties, the platform sharing its private information also contributes to lowering the environmental performance in certain conditions.