Bundling, Mass Customization and Competition under Consumption Uncertainty

Mass customization is redefining firm strategies as well as consumer expectations and consumption. This paper analyzes and compares the profitability of two distinct business strategies: bundling vs mass customization within a duopoly with differentiated goods and consumer uncertainty. The number and categories of highly customized and customizable products is wide. On the other hand, bundling is ever more pervasive in today’s markets, such as entertainment, consumer goods, Internet services, multimedia personal computers, catering, and education.The attention is focused on information goods, i.e. products with large amount of digital content, which facilitates the customizability of the products. In conclusion, mass customization is seen as an alternative strategy to differentiate firms in a highly competitive and segmented market, since it helps to provide customers with personalized products and services at a reasonably low costs through flexible mass production, thus reaching both a vast number of customers while responding to individual needs.