Consumer Preferences, Cannibalization and Competition: Evidence from the Personal Computer Industry

MIS Quarterly, Forthcoming

Posted: 12 Jun 2017

See all articles by Bin Li

Bin Li

Wright State University

Xinxin Li

University of Connecticut - Department of Operations & Information Management

Hongju Liu

University of Connecticut

Date Written: March 2017

Abstract

Understanding the degree of cannibalization and competition in online and offline markets is important to firms’ product line designs. However, few empirical studies have measured both effects simultaneously or have examined the factors that determine the extent of cannibalization and competition. In this study, we develop an empirical model to identify cannibalization and competition effects simultaneously in different markets, and further examine the impacts of consumer preferences on these two effects in a single integrated framework. Using data from the U.S. personal computer (PC) industry, we find that the online market exhibits stronger cannibalization and competition than the offline market. Both effects are significantly influenced by consumers’ search behavior and brand preference. Specifically, more active consumer search not only intensifies inter-brand competition but also amplifies intra-brand cannibalization. In addition, search has a higher impact on cannibalization than competition. Stronger consumer brand preference mitigates inter-brand competition, but its effect on intra-brand cannibalization varies for different consumer segments. In markets consisting of more high-end consumers, the intra-brand cannibalization increases with consumer brand preference, while, in contrast, in markets consisting of more low-end consumers, the intra-brand cannibalization decreases with consumer brand preference. The differences in consumer search and brand preference explain a significant fraction of the variations in both cannibalization and competition between different PC markets.

Keywords: cannibalization, competition, brand preference, consumer search

JEL Classification: D4, L1, M31, O33, L86

Suggested Citation

Li, Bin and Li, Xinxin and Liu, Hongju, Consumer Preferences, Cannibalization and Competition: Evidence from the Personal Computer Industry (March 2017). MIS Quarterly, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2982658

Bin Li

Wright State University ( email )

Dayton, OH 45435
United States

Xinxin Li (Contact Author)

University of Connecticut - Department of Operations & Information Management ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States
(860) 486-3062 (Phone)

Hongju Liu

University of Connecticut ( email )

2100 Hillside Rd, U-1041
Storrs, CT 06269-1063
United States

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