A Model of Product Design and Information Disclosure Investments

Loading...
Thumbnail Image
Penn collection
Marketing Papers
Degree type
Discipline
Subject
buyer uncertainty
information disclosure
product quality
infomediaries
Advertising and Promotion Management
Business
Business Administration, Management, and Operations
Business Analytics
Business and Corporate Communications
Business Intelligence
Marketing
Operations and Supply Chain Management
Organizational Behavior and Theory
Funder
Grant number
License
Copyright date
Distributor
Related resources
Author
Markopoulos, Panos M
Hosanagar, Kartik
Contributor
Abstract

New technologies such as product simulators and virtual reality now allow firms to provide realistic product usage experiences and reduce buyer uncertainty about product quality. We argue that today’s firms should view product design and investments to reduce buyer uncertainty as an integrated process, which is in turn influenced by how much information buyers can obtain from third-party infomediaries. We introduce a game-theoretic model of a competitive market where both quality production and quality disclosure are endogenous decisions, affected by information made available by third parties. We show that quality investment under uncertainty never exceeds the level of quality investment under perfect information. Furthermore, we show that information availability by third parties allows firms to free ride, and it especially favors lower quality firms, who can reduce their information disclosure investments more so than higher-quality firms. Finally, we show that the intuitive argument that firms must improve their product quality when overall information availability in the market improves does not always hold. Instead, improved information availability may enable firms to reduce their quality in some situations.

Advisor
Date Range for Data Collection (Start Date)
Date Range for Data Collection (End Date)
Digital Object Identifier
Series name and number
Publication date
2018-02-01
Volume number
Issue number
Publisher
Publisher DOI
Journal Issue
Comments
Recommended citation
Collection