We study competition between two multiproduct firms with distinct production technologies in
a market where customers have heterogeneous preferences on a single taste attribute. The
mass customizer (MC) has a perfectly flexible production technology and thus can offer any
variety within a product space, represented by Hotelling's linear city. The mass producer
(MP) has a more focused production technology and therefore offers a finite set of products
in the same space. The MP can invest in more flexible technology, which reduces its cost of …

1. Introduction A quintessential feature of modern commerce is the proliferation of product
variety in virtually every industry. As a result, many companies have begun formulating their
marketing and operations strategies around customization, while others still use mass
production technologies that limit them to a predeter-mined set of products. Hence, we
witness customizing firms competing against noncustomizing firms in many industries
ranging from health care to cosmetics. The business press provides many examples of …