Managing word-of-mouth with capacity allocation and advertisement

Dipkaya, Asya
We study the advertising and capacity decisions of a service firm under endogenous demand and multiple time periods. Consumers are exposed to two types of information: experiences of other consumers regarding fill rate of the service through WoM communication and the information provided by the firm through advertisements. As a result, consumer perception towards the firm keeps getting updated, which impacts demand. We examine fixed versus variable capacity cases. In each case, we study how the firm's decision changes when it is aware of the endogenous demand structure and when it is not.


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Citation Formats
A. Dipkaya, “Managing word-of-mouth with capacity allocation and advertisement,” M.S. - Master of Science, Middle East Technical University, 2021.