10 Clemons, Kauffman, and Weber
interaction of information personalization and product differentiation. They find that
both firms have an incentive to personalize their products in equilibrium when the
costs of providing quality and the costs of product misfits are low. Otherwise, as long
as the effectiveness of product personalization reaches at least some threshold value,
one firm personalizes while the other firm relies on standard product marketing. The
resulting equilibrium is generally asymmetric in the sense that one firm’s personalization
strategy does not necessarily guarantee a higher profit than the other firm, only
a higher profit than the alternative of both firms not personalizing. The authors offer
interesting practical examples for the different market scenarios.