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    The Theory—How Important Is Uncertainty?
    堪培拉代寫assignment
    it hAs long bEEn Known thAt customErs’ willingnEss to pAy for a specific product is
    determined both by their willingness to pay for their ideal product and by how closely
    the product they are considering matches or how much it deviates from this ideal.
    Hotelling [23], Salop [37],
    堪培拉代寫assignment
    and others model the difference between a customer’s
    ideal choice and an offering being considered as fit, shown by the distance between
    the customer’s ideal selection and the actual offering. A greater distance between
    customer preferences and a specific product results in worse fit, and higher fit cost,
    which reduces the customer’s willingness to pay for the offering. We can summarize
    this by saying the compromise discount simply measures the distance between the
    customer’s ideal choice and the actual offering.
    堪培拉代寫assignment
    To make this concrete, consider a student preparing for an interview. His ideal choice
    might be a 42 regular blue pinstripe suit, represented by the central asterisk (*) in
    Figure 1, with corresponding will ingness to pay V, the maximum he will pay for any
    suit. The student would be less pleased with a gray pinstripe, and a gray 44 would
    require significant alterations, and both would greatly reduce the student’s willing-
    ness to pay for the gray suit. In this figure, the horizontal or x-axis represents the set
    of all possible suits in some hypothetical and abstract suit-description space. Since
    all consumers will have different preferences, another student, taller, might prefer a
    larger suit, whereas a student with a different collection of dress shirts might prefer
    a different color. These other students would have their own asterisks located at a
    different point along the suit-description space, and their willingness-to-pay curves
    would peak over their own asterisks.8
    The horizontal line X in Figure 1 measures the distance between the location of the
    first student’s ideal suit (at the *) and the 44 gray suit in the abstract suit-description
    space. The vertical bar c measures the reduction in the student’s willingness to pay,
    caused by the compromise discount that results from the distance X. All suits can be
    located somewhere in their suit-description space, and differences among suits can
    be captured by their location in this space. likewise, all consumers have an ideal suit,
    and therefore consumers can likewise be located somewhere in suit-description space
    by the position of their ideal suit. This works equally well when describing consum-
    ers’ preferences for hotels, sports cars, or beer and coffee; products can be located
    in their product-category description space, as can consumers’ ideal purchases. We
    have always known that fit matters, both in size and in consumers’ preferences; none
    of this is new.

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