An Information-Based Approach to Labeling Biotechnology Consumer Products

Using an economic framework this paper explores the need for labeling of biotechnological consumer products. In particular, we assess the impact of labeling on information problems faced by consumers and regulators. Using information analysis, we propose an approach to labeling biotechnology products that attempts to respect both the real nature of consumer information-processing capacities and approaches and the environment of uncertainty in which any regulatory policy for biotechnology will operate. We conclude that the fact of uncertainty on the scientific front and the nature of consumer concerns in this area gives rise to a need for some type of labeling. Using labels to convey substantive information, however, is likely to be of limited value to consumers. A comprehensive approach to information policy for consumers in this field should aim instead to use labeling requirements to harness the incentives of producers and other private entities to effectively convey to consumers what they want and need to know. We therefore recommend that governments require a simple alert label on biotechnology consumer goods that will prompt consumers to assess their information needs and producers or others to supply those needs. Government regulation in this scheme would consist of basic health and safety regulation and direct or indirect monitoring and regulation of the content of the information ultimately conveyed to consumers by producers and others.     

Third-Party Certification,Sponsorship, and Consumers’ Ecolabel Use

While prior ecolabel research suggests that consumers’ trust of ecolabel sponsors is associated with their purchase of ecolabeled products, we know little about how third-party certification might relate to consumer purchases when trust varies. Drawing on cognitive theory and a stratified random sample of more than 1200 consumers, we assess how third-party certification relates to consumers’ use of ecolabels across different program sponsors. We find that consumers’ trust of government and environmental NGOs to provide credible environmental information encourages consumers’ use of ecolabels sponsored by these entities, and consumers do not differentiate between certified versus uncertified ecolabels in the presence of trust. By contrast, consumers’ distrust of private business to provide credible environmental information discourages their use of business association-sponsored ecolabels. However, these ecolabels may be able to overcome consumer distrust if their sponsors certify the ecolabels using third-party auditors. These findings are important to sponsors who wish develop ecolabels that are more credible to consumers, and thus encourage more widespread ecolabel use.     

Learning About Computers: An Analysis of Information Search and Technology Choice

We estimate a dynamic model of how consumers learn about and choose between different brands of personal computers (PCs). To estimate the model, we use a panel data set that contains the search and purchase behavior of a set of consumers who were in the market for a PC. The data includes the information sources visited each period, search durations, as well as measures of price expectations and stated attitudes toward the alternatives during the search process. Our model extends recent work on estimation of Bayesian learning models of consumer choice behavior in environments characterized by uncertainty by estimating a model of active learning—i.e., a model in which consumers make optimal sequential decisions about how much information to gather prior to making a purchase. Also, following the suggestion of Manski (2003), we use our data on price expectations to model consumers’ price expectation process, and, following the suggestion of McFadden (1989a), we incorporate the stated brand quality information into our likelihood function, rather than modeling only revealed preference data.Our analysis sheds light on how consumer forward-looking price expectations and the process of learning about quality influence the consumer choice process. A key finding is that estimates of dynamic price elasticities of demand exceed estimates that ignore the expectations effect by roughly 50%. This occurs because our estimated expectations formation process implies that consumers expect mean reversion in price changes. This enhances the impact of a temporary price cut. Finally, while our work focuses specifically on the PC market, the modeling approach we develop here may be useful for studying a wide range of high-tech, high-involvement durable goods markets where active learning is important.JEL Classification: C15, C33, C35, C42, C51, C52, D83, D84     

Is transparency a good thing? How online price transparency and variability can benefit firms and influence consumer decision making

The internet has empowered consumers and changed the way they search and shop for products and services by increasing the availability and transparency of pricing and other comparative information. However, what is less clear from a managerial perspective is just how transparent pricing information should be. While it might seem that increasing price transparency would reduce consumer search, we find that it may actually increase search and delay. In this article, we review the use of firms’ application of price transparency in practice and propose that specific types of information can influence how transparent prices are to consumers, and how such transparency can influence consumer decisions in a way that is beneficial for the firm. We focus on a specific form of transparency: whether or not the consumer knows the range of pricing. We also discuss whether a high variability pricing approach versus a low variability pricing approach influences consumer decision making—and whether this influence is moderated by transparency.     

A model of consumer information search and online network externalities

This article looks at a consumer who faces a choice between two sources of information: conventional and online. The online source is different from the conventional one because consumers care about how many people are using it along with them. Generally, the more users the better (positive network externality), but, on the other hand, the presence of more users implies a reduction of available capacity, about which consumers also care. We assume that consumers maximize their utility, which is modeled as a function of all other consumption, knowledge, and network externalities. Knowledge is conceptualized as a function of the amount of information spent both on the online network and on conventional sources. Since consumer information searches may differ according to demographic differences, this may result in consumers’ differences in their usage of online networks and conventional sources. We include these externalities in our model to better understand consumer choice behavior for the online network. The consumer utility function is estimated by using the model estimation method developed in this article, since the interactions implied by the consumer utility function are more complex than one could hope to estimate econometrically. We use survey data to regress the demand for online information depending on income, education, the number of users, and remaining capacity. We introduce a methodology to simulate how consumers’ representative utilities will behave in different network environments and derive implications for online network suppliers.     

How consumers use product reviews in the purchase decision process

This paper uses individual level data to examine the influence of product reviews in different stages of the consumer’s purchase decision process. Specifically, a two-stage model consisting of consideration set formation and choice is posited, where the consumer can incorporate information from product reviews in each stage. The model is estimated using an online panel survey about hotel choice. We find that (1) consumers use product reviews more in the consideration set stage and less in the choice stage, (2) Bayesian updating of prior perceived quality better explains how consumers use product reviews compared to two competing updating methods, and (3) the monetary value of a unit increase in the mean of product reviews is computed. Our results suggest that managers should make product review information (their number, average, and variance) available from the beginning of the search process and encourage satisfied customers to write reviews.     

Good Consumer Information: the Information Paradigm at its (Dead) End?

The traditional information paradigm postulates that increasing the amount of information and establishing full transparency help consumers with their decisions. We challenge this assumption and address criteria that good consumer information needs to fulfil. Based on the findings from research in behavioural economics and finance, necessary conditions for good consumer information include transparency, comprehensibleness, and comparability, whereas quality—in terms of clarity, fit to personal needs, and verifiability—represents the sufficient condition for good consumer information. Information that consumers currently receive hardly fulfils these conditions which, in turn, considerably hampers the trustworthiness and usability of this information. To mitigate consumers’ information problem and to recover the idea of the information paradigm, we suggest to extend the information model and to integrate the idea of collective consumers, to establish product testing principles, and to implement controlled minimum standard for (financial) products.     

Consumer Reaction to Nutritional Labels on Food Products

In order to design the most useful instruments of consumer protection, it is necessary to understand how consumers perceive and use such instruments. Often, basic consumer rights are considered more extensively in the design of consumer protection policies than basic patterns of consumer behavior and motivation. We are more likely to make information on labels complete as viewed by the expert than useful in the normal behavior of the consumer. This study is devoted to discovering how consumers perceive nutritional labels on food products. It draws conclusions about their meaning and usefulness to consumers.     

How e-WOM recommendations influence product consideration and quality of choice: A motivation to process information perspective

A laboratory experiment examines the effects of electronic word-of-mouth (e-WOM) on consumer consideration and choice of an experience product. Specifically, we manipulated the number of consumer recommendations and the optimality of the recommended product in a realistic online shopping environment. The results indicate that e-WOM is likely to result in more time considering the recommended product. For consumers more motivated to process information, e-WOM recommendations lead to more time spent on the choice task overall. Further, consumers with less motivation to process information make suboptimal decisions based on e-WOM recommendations. Consumers with a high motivation to process information are willing to accept recommendations and switch from declared attribute preferences, but choose only optimal products.     

The mobile shopping revolution: Redefining the consumer decision process

The use of mobile devices by consumers and the accompanying response by retailers is rapidly revolutionizing the retail environment. In the past, retailers have focused primarily on the outcome (to purchase or not to purchase) of the consumer decision process, but now mobile technologies give retailers the opportunity to more actively influence the entire consumer decision-making processes. The increasing use of mobile devices by consumers makes shopping a continuous rather than discrete activity that requires retailers to engage with their customers at critical touch points of the decision process in order to provide a more customer-centric experience. This change in focus from the decision outcome to the decision process signifies an important paradigm shift for the retailing industry. After an extensive review of the literature, we identify four pillars that form the foundation for the mobile shopping revolution and represent the essential ways and means through which retailers can engage with consumers during the decision process. We also discuss the different areas in which the pillars can enable retailers to achieve a sustainable competitive advantage in the mobile shopping era.     

Financial literacy education and behaviour unhinged: combating bias and poor product design

The growth of products available in the consumer financial market has provided more choice and formal control over household financial decisions than ever before. Financial literacy education programs are generally assumed to improve consumer behaviour in relation to financial products and services. However, there is scant evidence that demonstrates the causal link between education, literacy and behaviour. Through the use of a sample study, we show that the actions of individuals who are financially literate do not necessarily mean they will demonstrate good financial behaviour. We propose that in order to improve the financial behaviour of consumers, two critical areas need to be addressed. Firstly, the objectives of financial literacy programs should be not only to educate consumers about financial markets and products but highlight to individuals the psychological biases and limitations that they as humans cannot easily avoid. Secondly, the regulation of financial products sold to consumers needs alteration to meet the aim of protecting retail consumers from complex financial products that are confusing, ambiguous and inappropriate. We propose regulation and redesign of product information offerings using techniques employed in ecological interface design models to derive a suitability test for consumer financial products.     

Characteristics of Consumer Participants in Federal Trade Commission Rule Making

Increasing interest has been exhibited by both consumer groups and government agencies in gaining greater consumer participation in the rule-making procedures of the federal government. Yet little is known about the characteristics and attitudes toward marketing of “participant consumers”-those consumers who have participated in the process and made their viewpoints known to federal agencies. This study investigated such consumers. Significant differences were found between the demographic and attiludinal characteristics of participant consumers and consumers in general. To gain a balanced consumer perspective as inputs for regulations, federal regulators will have to extend their information gathering activities well beyond the normal consideration of consumer briefs received.     

Alternative Regulatory Cases Challenging Consumer Policy

By means of the concept of postmodern politics, we provide insights into how alternative regulation is challenging consumer policy. New actors, new forms of interaction, and new goals are emerging alongside established forms of consumer policy. In particular, we examine two alternative regulatory cases: trust marks and consumer-generated information systems. They both exemplify alternative regulation of electronic commerce, which has facilitated regulatory innovation for over a decade. On the basis of our analysis, we suggest that governmental consumer policy cannot imitate the alternative regulatory solutions. We also encourage governmental actors to consider building bridges to consumer networks. This would broaden the scope of consumer policy and be in line with the modes of operation of governmental actors. Consumers are themselves contributing to this rethinking of governmental consumer policy. By networking, consumers provide each other with empowering information on consumption. Doing so on the massive scale enabled by information and communication technologies, they are challenging conventional consumer policy, which can no longer address consumer needs as it could in the pre-Internet days. New issues are emerging for consumer policy to address, and networked consumers are already contributing to policy.     

Informational Inputs as Influences on Efficient Consumer Decision-Making

The effects of consumer information and consumer sophistication on the ability of consumers to make purchases offering the greatest benefits were examined. It was found that consumer information enhances the likelihood that consumers will make efficient choices of products. Consumer sophistication was also found to be an intervening variable in consumers' use of information.     

The Influence of Communication Source and Mode on Consumer Adoption of Technological Innovations

Communication is the critical process of diffusion of technological innovations, yet there is little research in the consumer behavior literature investigating how communication affects consumers’ decision to adopt technological innovations. This paper examines the effects of communication source and modality on consumers’ adoption of technological innovations using the 1999 University of Michigan's Survey of Consumers data. Specifically, a typology of communication sources and modality is presented, and the respective and interrelated influences of source and mode on consumers’ adoption of electronic banking are examined. The results demonstrate that communication factors can serve as significant predictors of consumer adoption of technological innovations and that consumer preferences for communication source and modality vary for different segments of adopters. In addition, we find information gaps between consumer segments high and low in socioeconomic status. Finally, implications for the diffusion of technological innovations and future research directions are discussed.     

Implications of Consumer Information Processing Research for the Design of Consumer Information Systems

The commercial success of computerized consumer information systems will depend heavily on the extent to which they help consumers make choices. A system's usefulness will be a function of both the information it contains and the capabilities it offers to process this information. These capabilities will be incorporated in the system's access “language.” This paper reviews research on how consumers process information to make choices, and discusses the implications of this research for the design of consumer information system languages. A hypothetical example is presented and contrasted briefly with available access languages.     

The Hierarchy of Consumer Participation: Knowledge and Proficiency in Telecommunications Decision Making

This paper establishes a “hierarchy of consumer participation” that has striking parallels to the hierarchy of political involvement developed by Milbrath (1965, 1982). Analysis of consumer decision making required by the deregulation of telecommunications shows that independence of decision making, propensity to use sources of information, and propensity to influence others' decisions are highly interrelated. Four main types of consumers are identified: consumer influentials, active consumers, dependent consumers, and nondecision makers. The levels of consumer participation should be highly salient in defining targets and programs for consumer research, education, protection, and policymaking.     

Advertising strategy for outbound travel services

When purchasing a travel service, consumers perform multiple information searches. Depending on the accessed information and the type of media for travel service advertisements, consumers make different evaluations on the travel service. Given this context, we propose a consumer persuasion model that reveals the most effective persuasion process for consumers to make purchasing decisions on travel services. For this study, we conducted a comparative analysis to discern effectiveness and limitations between newspapers and TV infomercials; the two major media for travel service advertisements. Based on the results from the analysis, we drew some meaningful managerial implications for travel service advertising strategy.     

Use of persuasive techniques on Internet shopping sites

Huge strides in technological development combined with marketing strategies have led to dramatic changes in the way information is transmitted and communicated to the consumers, and subsequently used by the consumers. Information has become a dominant factor in determining why, where, what, and how consumers shop, process information, and make decisions. While marketing information has always been an important factor in consumer decision‐making, its provision on demand and added convenience via the Internet has created a need to research the nature and amount of information that these technologies provide. Advertisements use different forms of persuasion to gain consumer attention, meet their economic and emotional shopping needs, to create a positive image of the product, brand, and the shopping medium, and influence consumers to purchase the product. Persuasion may be classified as functional congruity and self‐congruity routes to persuasion (Johar & Sirgy, 1991). Fifty websites were studied for utilitarian and value‐expressive forms of persuasion by product differentiation. The websites were classified as those selling tangible products only and those selling intangible products only, and those selling both tangible and intangible products. The paper will present results of the study along with a discussion and conclusion with implications on consumer well‐being.     

Examining the Use of Nutrition Information on Restaurant Menus

Over the past decade, the world has been facing an obesity epidemic. In the popular press and certain governmental and public policy circles, this seems to be attributed to the marketing efforts of fast-food and chain restaurants. As a solution to this problem, many have proposed increasing the amount of nutrition information available to the public by adding nutrition information to restaurant menus and menu boards. However, some debate has ensued about the use and function of this nutrition information. Specifically, this research attempts to uncover whether consumer actually use the nutrition information to aid their decision-making process. In two experimental studies, results are presented to enlighten the discussion of consumers’ reactions to nutrition information when it is present on restaurant menus. Contrary to what public policy makers have stated, this research shows that only small groups of consumers use nutrition information on a restaurant menu. The results in both studies indicate that when consumers eat out at restaurants, their decisions are based on taste and preference rather than nutrition information if it is presented on a menu. These results may have implications for the provision of nutrition information on restaurant menus and consumer decision-making.