Collaborative Research: Operational Strategies for Price and Service Quality Competition

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This grant provides funding for an analysis of how to use operational strategies to improve a firm's long-run profit and its ability to attract and retain customers through improved service quality. Several classes of novel models will be developed for the structural analysis of optimal pricing, production, and service quality selection in a competitive make-to-order marketplace. Once initial analysis is completed, these models will be extended to a variety of complex environments, including models featuring multiple quality attributes, general demand settings, multi-class demand, and oligopoly settings. To account for the impact of operational strategy in a more complex environment, the research team will study models under which the firm offers products on both a make-to-order and make-to-stock basis. If successful, the results of this research will lead to a deeper understanding of the impact of dynamic operational strategy in a competitive market place, and in particular, will help to explain how the firm's ability to choose the "right" price and quality will affect the firm's long-run profit and market-share. With the cooperation from industry partners, the research team will develop a methodological foundation that will ultimately lead to more efficient and effective decision support systems to help managers to choose a "right" combination of price and service (product) quality. Finally, the insights developed in this research will be incorporated into a case study and a teaching module. This research is collaborative work between the PIs at the University of Berkeley and Washington University in St. Louis. Both the PIs and their graduate students will regularly travel between the two locations to further facilitate the collaboration.