1. Introduction

The central theme of this thesis is the customization of digital products in the Internet economy. As a global network, the Internet can be used to take advantage of the typical characteristics of digital products such as reproducibility (Choi et al., 1997) and versioning (Shapiro and Varian, 1999). These characteristics facilitate the customization of digital products and can thus lead to an enormous variety. In turn, this enormous variety can facilitate customization, which in theory can provide all consumers with customized and personalized products they need or desire. However, this abundance of choice can make the Internet a rather complex environment for consumers. The purpose of this thesis is to find out how suppliers of digital products over the Internet can reduce this variety-induced complexity for consumers by customizing their digital products in a way that it reduces this complexity. To accomplish this aim, I conducted a case study at two companies (Last.fm and Pandora Media). Both companies enable consumers to customize digital products on the Internet, in the form of online personalized radio stations, but they use different strategies. The perspective which is chosen for this thesis is the consumer. The case studies at the two companies are conducted at the supplier, however, the aim is to increase consumer surplus.


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