Quality disclosure in the presence of strategic consumers

Consider a market for short-life products, such as smartphones, where a firm and consumers have asymmetric quality information, the firm sells products in two periods, and consumers make purchase decisions strategically. We investigate when a firm should disclose quality and the interaction between consumers' strategic behavior and the firm's disclosure behavior. We obtain several findings. First, regardless of whether consumers have low or high patience, the firm should disclose quality information if product quality is high and conceal it if product quality is low. However, for products with moderate quality levels, the firm will disclose more quality information to consumers with relatively high or low patience levels than when consumer patience is moderate. Second, firms will disclose less information when consumers behave strategically than when they are myopic. Third, when concealing quality information is an equilibrium, product prices are affected only by disclosure costs and independent of true product quality. Finally, the firm can benefit from consumers' strategic behavior and a higher disclosure cost, but greater patience might be detrimental to consumer surplus and social welfare.     

Consumer susceptibility to interpersonal influence and attributional sensitivity

This research examines the relationship between consumer susceptibility to interpersonal influence and attributional sensitivity. It is hypothesized that consumer susceptibility to interpersonal influence is moderated by the level of attributional sensitivity. Across two studies, this hypothesis was supported. Individuals high in attributional sensitivity scored higher on various measures of consumer susceptibility to interpersonal influence than individuals low in attributional sensitivity. This suggests that consumers susceptible to the influence of others are more likely to purchase products that they perceive will lead others to make favorable attributions about them, and avoid purchasing products that they perceive will lead others to evaluate them negatively. © 1992 John Wiley & Sons, Inc.     

Managing Opportunism in China: The Roles of Guanxi,Environmental Uncertainty,and Management Culture

ABSTRACT

This cross-cultural comparison aims to understand whether the influence of consumer ethnocentrism (CE) on consumer preference for domestic versus foreign products is product category and country-of-origin dependent. Three countries with dissimilar cultural orientation and economic status—China, South Korea, and the United States—were examined. American consumers were found to be more ethnocentric than Chinese and South Korean consumers. CE was found to significantly and positively predict American and Korean consumers’ preference for domestic products across product categories, while Chinese consumers’ CE did not translate into their preference for Chinese products. In addition, the relationship between CE and purchase preference varied across product categories as well as countries of origin.     

Impact of personalization and privacy concerns on information disclosure and pricing

Advances in IT have enabled some firms to offer personalized products according to the private information disclosed by consumers, while others are still offering standardized products, which brings about asymmetric competition. For consumers, disclosing private information for personalized products leads to reduced misfit cost as well as privacy loss. To illuminate the impact of consumers' trade-off between the benefit of information disclosure and the associated privacy concerns on firms' asymmetric price competition, we consider a setting where only one firm is capable of product personalization based on consumers' personal information. The capable firm makes a profit from selling the product and monetizing consumers' information. We demonstrate that as the capable firm becomes more adept at personalization, he may raise or lower the price depending on his profit foci, and an improvement in his capability does not always guarantee a higher profit. Counterintuitively, an increase in the unit misfit cost (i.e., greater product differentiation) can, under certain circumstances, intensity price competition, making both firms worse off and leading to higher consumer surplus. We also show that when consumers are more privacy-concerned, there exists an indirect effect that weakens the impact of an increase in price on the monetization of consumers’ information, and hence price competition can be mitigated and both firms can be better off. Furthermore, we demonstrate that product personalization with misfit-reducing effect always increases consumer surplus under the asymmetric competition. Our findings provide firms and policy-makers with great managerial insights.     

How incumbent firms foster consumer expectations, delay launch but still win the markets for next generation products

Consumers learn quality of many durable products through word-of-mouth information while firms launch new and improved products frequently in these markets. This paper examines firm incentives to invest in R&D to compete for patents in makets where consumers rely on word-of-mouth information and have expectations about the new products before launch. When its loss due to a possible entry is above a threshold, an incumbent has more incentives than a potential entrant to invest in R&D for patents. Moreover, if the current product is more profitable, its true quality is above consumer priors and the quality of the new product is below a threshold, it is optimal for the incumbent to launch the new product after a time lag. The later the optimal time of launch, the greater is the incumbent’s potential loss if entry occurs and greater its incentives is to invest in R&D versus that of the entrants. While potential entrants are generally thought to have more incentives to invest in a drastic innovation which results in a race to launch the new products, we show that the more drastic the innovation, the later the optimal time of launch and greater are the incumbent’s incentives to invest in R&D when the value added of the new product can be conveyed to all the consumers. Only when consumers are uncertain about the value added of the new product, the incumbent’s incentives are lower. We also demonstrate that by promoting consumer expectations about the new product before launch, an incumbent has more time to launch and higher probability of dominating its market.     

When the frugal become wasteful: An examination into how impression management can initiate the end-stages of consumption for frugal consumers

Premature disposal of functional products is a global problem adding to waste and feeding a consumer culture. Contrary to this, frugal consumers take care and extend the life of their products, elongating the usage and value obtained from their possessions. Despite this, little is known about frugal consumers and the factors that eventually initiate their actions towards the end-stages of consumption (e.g., declined usage). The present research explores one such psychological factor that may dictate frugal consumers’ willingness to discontinue usage of their products; impression management. Three studies demonstrate that when the marketplace's opinion of an owned product is negative (e.g., inferior value), then the well-accepted frugality-usage intentions relationship diminishes. This effect is due in part to the undesirable image that owning such a product portrays, that of a consumer who makes poor choices. By examining what can initiate the end-stages of consumption for frugal consumers, this study broadens our understanding of anticonsumption lifestyles postpurchase, exploring factors beyond functionality, and obsolescence that influence decisions to continue or discontinue using products consumers already own.     

Assessing Russian consumers' imported versus domestic product bias

Data from a cross‐section of 438 Russian consumers were collected and analyzed to evaluate consumer preference for ten product types—five consumables and five durables. Results indicate that when Russian consumers consider purchasing a consumable product, consumer ethnocentrism levels and product characteristics reinforce each other, resulting in a strong domestic bias; however, these variables conflict with each other when consumers consider durable products, resulting in consumers exhibiting an inclination for imported durables. This indicates that product characteristics may influence product preference (domestic versus imported) more than consumer ethnocentrism levels. © 2006 Wiley Periodicals, Inc.     

Seller honesty and product line pricing

We study upselling in markets where the seller observes consumer need but the consumer herself may not (e.g., medical care, durable repairs, financial and legal services). The seller may recommend excessive product features to uninformed consumers. In a monopoly with two types of consumer (one with a basic need and the other an advanced need) and two types of service (a basic service which fulfills only the basic need and an advanced service which fulfills both needs), we investigate the firm’s honesty and product-line pricing. We reach several results. First, the firm is honest if the basic service is superior (in that it generates higher per-capita social surplus than the advanced service under the efficient allocation) or if the consumers with the basic need are sufficiently many. Second, when there exist informed consumers who neglect seller recommendation, the presence of informed consumers may cause consumer welfare to decrease, and a larger informed population may cause firm profits and social welfare to increase or decrease. Lastly, when the informed consumers boycott a dishonest firm and withhold purchase, firm profits may increase because the threat of boycotting makes the firm more credible and allows a higher price of the advanced service.     

Impact of actual service provider failure on the satisfaction with aggregator

The purpose of the paper is to investigate the impact of the failure caused by the actual service provider on consumer satisfaction with the aggregator firm, where the aggregator firm works as a bridge between the consumers and the actual service providers using technology, resources, information etc., thus reducing the information search cost, process-related costs, and quality risks for the consumers. We have applied retrospective experience sampling to collect data and used structural equation modeling to validate the conceptual model of the study. We found that people consider the actual service provider’s failure as the aggregator firm’s responsibility when the attributional factors (control and stability) are strong. Moreover, when consumers perceive that the aggregator firm is responsible, they will ask for less punishment of the actual service provider and more monetary compensation. Additionally, severity of the failure increases the consumer’s recovery expectations. However, the sense of power of the consumers leads to increasing expectations of punishment of actual service provider and decreasing expectations of monetary compensation. Lastly, the actual monetary compensation or actual punishment of the service provider leads to higher level of satisfaction for the consumers. We discussed the implications of the results in the light of relationship management and service recovery design of aggregator firms.     

Consumer deliberation and quality signaling

Consumers are often uncertain about their product valuation before purchase. They may bear the uncertainty and purchase the product without deliberation. Alternatively, consumers can incur a deliberation cost to find out their true valuation and then make their purchase decision. This paper proposes that consumer deliberation about product valuation can be an endogenous mechanism to enable credible quality signaling. We demonstrate this point in a simple setup in which product quality influences the probability that the product has high valuation. We show that with endogenous deliberation there may exist a unique separating equilibrium in which the high-quality firm induces consumer deliberation by setting a high price whereas the low-quality firm prevents deliberation by charging a low price. Compared to the case of complete information, the price of the high-quality firm can be distorted upward to facilitate consumer deliberation, or distorted downward to avoid the low-quality firm’s imitation. In an extension we show that dissipative advertising can facilitate quality signaling. The high-quality firm can utilize advertising spending to avert imitation from the low-quality firm without distorting price downward, earning a higher profit than that without advertising. However, advertising mitigates the distortion at the expense of consumer surplus and social welfare.     

How Dispersive Opinions Affect Consumer Decisions: Endowment Effect Guides Attributional Inferences

Electronic word-of-mouth (eWOM) dispersion, reflecting the extent of reviewers’ opinion divergence regarding a product, determines consumer decisions. Drawing upon the endowment effect and attribution literature, this research proposes that the endowment effect mediates the influence of eWOM dispersion on attributional inferences, and the display formats of eWOM dispersion (“horizontal bar chart” vs. “eWOM content”) moderate the mediating influence of endowment effect on attributional inferences of eWOM dispersion. Three complementary studies reveal three key insights in this setting. First, when consumers already having an emotional attachment to a product and subsequently encountering dispersive eWOM, the higher the level of eWOM dispersion, the stronger the endowment effect. Secondly, In such circumstance, the stronger endowment effect promotes more reviewer-related attribution inference of high-dispersion eWOM, and the weaker endowment effect promotes more product-related attribution inference of low-dispersion eWOM. Third, the positive influence of eWOM dispersion on endowment effect is stronger for eWOM dispersion in the complexity or disfluency display format (i.e. “reviewers’ impression of product”) than for eWOM dispersion in the simply of fluency display format (i.e. “horizontal bar chart”), more importantly, the mediating influence of endowment effect on attributional inferences is moderated by the display formats of eWOM dispersion, and this findings persists even when product category (hedonic vs. utilitarian) is taken into consideration. The theoretical implications for the eWOM dispersion and attribution literature and practical implications for online retailers are discussed.     

Consumers’ forgiveness after brand transgression: the effect of the firm’s corporate social responsibility and response

Abstract

In this article we examine the interplay between the severity of a brand transgression, consumers’ prior awareness of the firm’s corporate social responsibility (CSR) initiatives, and the firm’s response (apology vs. apologia) on the rates of forgiveness among consumers. Results of two experiments show that consumers’ prior awareness of the firm’s CSR initiatives significantly differentiates apologia from apology, with the effect of apology on consumer forgiveness being more apparent when brand transgression severity is mild. Results also show that consumer forgiveness mediates the effect of brand transgression severity, firm response, and consumer awareness on repurchase intentions. In this way, the study enables managers to determine whether or not an apology or apologia will be sufficient to solicit consumer forgiveness, using information about the levels of awareness of CSR among consumers.     

Reduce Content or Raise Price? The Impact of Persuasion Knowledge and Unit Price Increase Tactics on Retailer and Product Brand Attitudes

This research investigates consumer reactions to the practice of increasing unit prices of products by either reducing product content or increasing total prices. Using pricing tactic persuasion knowledge (PTPK) as a lens for understanding, I predict that total price increases garner less favorable attitudes toward retailers for relatively low PTPK consumers, while content reductions garner less favorable attitudes toward product brands for relatively high PTPK consumers. The results of an experiment with a nationally representative sample of U.S. consumers support these asymmetric predictions about PTPK consumer segments as well as expectations about the underlying psychological processes.     

Consumer Ethnocentrism and Country-of-Origin Effects in the Moroccan Market

ABSTRACT

Differences in consumer values exert a powerful impact on product acceptance. Morocco is no stranger to this phenomenon. While this country's consumers have easy access to world markets, consumer ethnocentrism can restrict choice. The objective of this research has been to investigate ethnocentric behavior of Moroccan consumers and the extent to which domestic products might be preferred to foreign products or vice versa. Data were collected via face-to-face interviews with 400 consumers in four major Moroccan cities. A questionnaire was developed for this purpose using a version of the Consumer Ethnocentrism Scale (CETSCALE). Opinions about four products were solicited. The four products were jeans, cars, shampoo, and juice. The interviewees were asked their opinions about product attributes and about various countries-of-origin. Their responses were analyzed also on the basis of their most essential demographic characteristics. Logistic regression models were developed to analyze the data.     

A process model of the effects of price promotions on brand image

This article introduces a model to explain the process by which consumer satisfaction or dissatisfaction with price promotions can influence brand image. Specifically, the model explores conditions under which consumers experience satisfaction or dissatisfaction with price promotions, predicts ways that consumers might engage in various levels of attributional processing about price promotion satisfaction or dissatisfaction, and examines how consumer attributions of price promotion satisfaction or dissatisfaction influence brand image. Managerial implications and directions for future research are also offered. © 1994 John Wiley & Sons, Inc.     

Designing the content of advertising in a differentiated market

In many markets, consumers use attribute information to assess the value they expect from purchasing a product or service. This includes many low involvement experience goods including take-out food, many packaged good categories and restaurants. In these markets, quality differences exist but many differences are horizontal in nature: the consumer is interested in finding a product that meets her unique tastes. Beyond ensuring that consumers know the brand, the category and the price; it seems advertising should provide consumers with attribute information. However, a significant proportion of advertising does not provide it. In fact, within the same category, competitors respond to messages that emphasize detailed attribute information with messages that are devoid of attribute information. These messages are uninformative about product attributes. We explore how competition in a differentiated market is affected by the ability of a firm has to choose uninformative messages. We construct a model to investigate the factors that affect a firm’s decision to use advertising with detailed attribute information or advertising that does not provide it. The model demonstrates that content decisions about advertising are affected by the differences between products, the range of heterogeneity in consumer tastes and the degree to which costs increase as a function of the quantity of information in advertising. Surprisingly, even when the cost to increase the quantity of information in advertising is low, uninformative campaigns can be more profitable than campaigns with attribute information. The analysis also demonstrates that firms can be more likely to provide attribute information when there are less consumers that are attribute-sensitive. Finally, the model shows that uninformative messages can create “artificial differentiation” in some situations.     

Is Your Product Facing the Ad's Center? Facing Direction Affects Processing Fluency and Ad Evaluation

This research investigates a frequently encountered and important decision faced by advertisers: how to face profile images of products in advertisements. Three empirical studies find support for a profile-fluency effect: Profile images of products facing inward (versus outward) toward the center (versus edge) of an ad are easier for consumers to process and result in more positive consumer evaluations. In addition, there is evidence that this effect depends on the shopping goal of the consumer. The results have clear implications for current practices in advertising and offer opportunities for future research.     

The Interest of Consumers in Ecological Product Information Is Growing – Evidence From Two German Surveys

In a German survey from 1989, consumers showed less interest in information about ecologically relevant product attributes than could be expected after several years of vivacious discussion in the mass media about ecological problems associated with consumer products and consumer behaviour. However, a replication of the study in 1998 showed a considerable increase of consumer interest in such information. In particular, there is evidence that in comparison to common product quality information, on average consumers rate the relative importance of ecological product information higher, that consumers want product testing agencies to take into account more aspects of products that are related to ecology, that more consumers would prefer reliable standardized ecological information obtainable at the point of purchase, e.g., in the form of eco-labels, and that consumers view an increasing number of products as potentially affected by ecological risks. Finally, the results show that at least for some products, the scope of perceived ecological risks seems to have increased and that consumers generally are becoming concerned with harmful effects of the production and distribution of a product in addition to the effects caused by usage.     

Facing the “Right” Side? The Effect of Product Facing Direction

Product image display in advertising plays an important role in consumer perception and behavior. In this research, we establish important downstream consequences of one significant aspect of product image display—facing direction—on product evaluations. Building on the literature of visuospatial attention and grounded cognition, we show that products with their images facing toward the left (versus right) in advertising are evaluated more favorably when consumers’ temporal focus is on the past, whereas the reverse holds true when consumers focus on the future. Furthermore, we establish that the impact of facing direction on product evaluations exists regardless of the horizontal position of product images. In addition, we demonstrate that for products higher on desirability features, a mismatch (versus match) between facing direction and consumers’ temporal focus leads to higher product evaluations, whereas the reverse holds true for products higher on feasibility features. Important implications for advertising theory and practice are discussed.     

Consumers’ response to weak unique selling propositions: Implications for optimal product recommendation strategy

We use a multi-method approach (analytical model and behavioral experiment) to investigate product recommendations based on less-important attributes (weak unique selling proposition, USP). We consider multiple scenarios in which a recommender’s level of expertise (knowledge about product attributes and their importance) and bias (preference for the firm as opposed to consumers) operate as cues for consumers to evaluate the recommender’s message.Results show that optimal messaging behavior is a function of an interactive process involving recommender characteristics and the relative importance of product attributes to consumers. The results identify conditions that determine when weak USPs are likely to increase or decrease a consumer’s propensity to buy the recommended product and when a recommender might optimally communicate weak USPs or avoid sending such a recommendation.