Misrepresentation of Credence Goods and Channel Design

Loading...
Thumbnail Image
Penn collection
Marketing Papers
Degree type
Discipline
Subject
B2B Marketing
misrepresentation
quality
product delivery
channel design
Advertising and Promotion Management
Business
Business Administration, Management, and Operations
Business Analytics
Business and Corporate Communications
Management Sciences and Quantitative Methods
Marketing
Operations and Supply Chain Management
Funder
Grant number
License
Copyright date
Distributor
Related resources
Author
Cohen-Vernik, Dinah
Yildirim, Pinar
Mittal, Vikas
Contributor
Abstract

Credence goods are often delivered to consumers via a vertical channel where the true quality of the good is determined by a manufacturer (an upstream channel member), while consumers' quality perceptions are driven by the observable signals of quality sent by a retailer (a downstream channel member). We study product misrepresentation in a vertical channel with asymmetric information about true product quality and focus on conditions that incentivize downstream channel members to misrepresent product quality to consumers. We develop a model with credulous consumers who rely on seller signals of quality to determine their expected utility from consumption of goods. The model shows that product misrepresentation rises as an equilibrium outcome due to actions of both the manufacturer and the retailer. We suggest that channel design can be a mechanism mitigating the level of misrepresentation. Specifically, adding more retailers in a channel can reduce the extent of misconduct and can increase the profits of the channel members.

Advisor
Date Range for Data Collection (Start Date)
Date Range for Data Collection (End Date)
Digital Object Identifier
Series name and number
Publication date
2015-01-10
Volume number
Issue number
Publisher
Publisher DOI
Journal Issue
Comments
This is an unpublished manuscript.
Recommended citation
Collection