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Does Market Competition Lead To Customization?, Wen-Tai Hsu, Yi Lu, Travis Ng
Does Market Competition Lead To Customization?, Wen-Tai Hsu, Yi Lu, Travis Ng
Research Collection School Of Economics
This paper proposes a theory of competition and customization. When firms allocate their production to both custom-made and standardized products, the fraction of sales from the former will increase in the face of increased competition. Recent surveys conducted by the World Bank on Chinese firms provide a rare direct measure of customization that allows us to test the above-mentioned prediction. We find empirical results consistent with the prediction.