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Designing Products and Services for Consumer Welfare: Theoretical and Empirical Issues

Author

Listed:
  • Sunil Gupta

    (Columbia University)

  • Rajeev Kohli

    (University of Pittsburgh)

Abstract

In this paper we examine the theoretical and empirical issues that arise for a decision maker who wishes to use the target population's preferences as an input for designing new products and services. The marketing literature suggests using essentially the same approach as that for the problem, with one exception. Instead of maximizing profits, share or volume, the to society is maximized. However, the social welfare literature has suggested several other measures of welfare and shows that no single welfare function dominates all others. Therefore, to choose an appropriate welfare function to maximize the decision maker must first examine the theoretical and empirical similarities between the alternatives. For six prominent welfare functions, we examine the theoretical differences in terms of the notion of promoted and the kind of . Empirically, we examine the similarities in social rankings and first choices induced by these welfare functions under various preference configurations. We also examine their sensitivity to measurement error and preference normalization.

Suggested Citation

  • Sunil Gupta & Rajeev Kohli, 1990. "Designing Products and Services for Consumer Welfare: Theoretical and Empirical Issues," Marketing Science, INFORMS, vol. 9(3), pages 230-246.
    • Handle: RePEc:inm:ormksc:v:9:y:1990:i:3:p:230-246
    DOI: 10.1287/mksc.9.3.230
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    Cited by:

    1. Chen, Pingping & Zhao, Ruiqing & Lan, Yanfei, 2022. "E-commerce platform canvassing and service upgrade in an ocean shipping supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 158(C).
    2. Maoqi Liu & Li Zheng & Changchun Liu & Zhi‐Hai Zhang, 2023. "From share of choice to buyers' welfare maximization: Bridging the gap through distributionally robust optimization," Production and Operations Management, Production and Operations Management Society, vol. 32(4), pages 1205-1222, April.
    3. Neeraj Arora & Ty Henderson & Qing Liu, 2011. "Noncompensatory Dyadic Choices," Marketing Science, INFORMS, vol. 30(6), pages 1028-1047, November.
    4. Lin Boldt & Neeraj Arora, 2017. "Dyadic Compromise Effect," Marketing Science, INFORMS, vol. 36(3), pages 436-452, May.
    5. Anocha Aribarg & Neeraj Arora & Moon Young Kang, 2010. "Predicting Joint Choice Using Individual Data," Marketing Science, INFORMS, vol. 29(1), pages 139-157, 01-02.

    More about this item

    Keywords

    new products; social welfare;

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