scholarly journals Prepurchase Information Acquisition and Credible Advertising

2020 ◽  
Author(s):  
Pedro M. Gardete ◽  
Liang Guo
Keyword(s):  
Product Quality ◽  
Information Acquisition ◽  
Consumer Surplus ◽  
Cheap Talk ◽  
Perceived Quality ◽  
Expected Value ◽  
Consumer Information ◽  
Informative Advertising ◽  
Firm Profitability ◽  
Advertising Strategies

Consumers can decide whether to acquire more information about their valuations prior to purchase. In this paper, we examine pricing and advertising strategies when consumers can engage in prepurchase information acquisition. We show that consumer information acquisition can increase valuation heterogeneity and undermine a firm’s ability to extract consumer surplus. As a result, interestingly, a higher product quality can exert a nonmonotonic impact on equilibrium information acquisition, hurt firm profitability, and lead to lower consumer surplus. We also demonstrate that prepurchase information acquisition can be an endogenous mechanism to enable credible advertising in a cheap-talk setting. We show that quality claims in advertisements can be informative even when the firm can freely misrepresent its advertising message. Informative advertising can arise because a higher perceived quality can not only increase consumers’ expected value, but it also induces more information acquisition and thus hurts the firm’s ability to extract consumer surplus. This novel explanation for the credibility of cheap-talk advertising is distinguished from those identified in the literature (e.g., matching between firm types and heterogenous consumers, restrictive communication on multidimensional attributes). Moreover, we show that a higher quality can soften competition by inducing more information acquisition, thus benefiting the rival firm’s profitability. This paper was accepted by Matthew Shum, marketing.

scholarly journals A Theoretical Analysis of the Pricing and Advertising Strategies with Lévy-Walking Consumers

2021 ◽  
Vol 16 (6) ◽  
pp. 2129-2150
Author(s):  
Wei Wang ◽  
Gang Li
Keyword(s):  
Consumer Surplus ◽  
Economic Effects ◽  
Product Price ◽  
Informative Advertising ◽  
Walking Behavior ◽  
Advertising Strategy ◽  
Advertising Strategies ◽  
Movement Distance ◽  
Welfare Implications ◽  
Firm Profit

The pervasive adoption of mobile devices and proximity technologies enables firms to trace consumers’ trajectories and locations. This connects firms’ marketing and operations strategies more tightly with consumer mobility. In this paper, we propose a novel analytical model to examine the economic effects of consumer mobility on pricing and advertising strategies by incorporating consumers’ Lévy-walking behavior into advertising economics models. We ascertain the convergent effect of consumer mobility, i.e., consumers’ convergence to a firm leads to higher product price and advertising level. Meanwhile, it improves social welfare by increasing firm profit and consumer surplus. More interestingly, we find that consumers’ average movement distance (AMD) has opposing influences in pricing and advertising strategies. Specifically, longer AMD strengthens the convergent effect on advertising strategy but weakens that on pricing strategy. Finally, we also conduct a numerical analysis to uncover the impacts of the presence of proximity technologies on advertising outcomes. The results of this paper provide advisable guidance to firms on how to craft and adjust pricing and advertising strategies in accordance to consumer mobility. Moreover, the results present insights on welfare implications of informative advertising from the perspective of consumer mobility.

scholarly journals Price Discrimination with Varying Qualities of Information

2016 ◽  
Vol 16 (2) ◽  
pp. 1093-1121 ◽  
Author(s):  
Qihong Liu ◽  
Jie Shuai
Keyword(s):  
Price Discrimination ◽  
Information Acquisition ◽  
Information Quality ◽  
Consumer Surplus ◽  
Spatial Differentiation ◽  
Consumer Welfare ◽  
Consumer Information ◽  
Demand Elasticity ◽  
Social Surplus ◽  
Potential Damage

Abstract Advances in information technology have greatly enhanced firms’ ability to collect, market and utilize consumer information. As the market for consumer information expands rapidly, businesses are armed with unprecedented means to target any group of consumers they desire. This has important and far-reaching impacts on consumer welfare. In this paper we analyze the welfare impacts of price discrimination facilitated by increasing qualities of consumer information. We employ a two-dimensional spatial differentiation model where consumer information is available on one dimension, and better information leads to more refined price discrimination. We find that as information quality improves, equilibrium prices and profits monotonically increase while consumer surplus and social surplus monotonically decrease. Price discrimination has a reduced demand elasticity effect which becomes stronger when consumer information becomes more precise. Our results suggest that regulators need to pay more attention to the potential damage to consumer welfare by the increasing collection and utilization of consumer information. We also endogenize firms’ information acquisition decisions.

scholarly journals The impacts of digital content piracy and copyright protection policies when consumers are loss averse

2021 ◽  
Vol 0 (0) ◽  
pp. 0
Author(s):  
Yan-Xin Chai ◽  
Steven Ji-Fan Ren ◽  
Jian-Qiang Zhang
Keyword(s):  
Product Quality ◽  
Loss Aversion ◽  
Copyright Protection ◽  
Consumer Surplus ◽  
Digital Content ◽  
Purchase Decisions ◽  
Information Effect ◽  
Technological Advances ◽  
Firm Profitability ◽  
Game Theoretic

<p style='text-indent:20px;'>Recent technological advances in digitization and online communications have enabled unauthorized reproduction and illegal file-sharing. However, controversies still exist over the impacts of digital content piracy and copyright protection policies. Using a game-theoretic framework, we examine the impacts of digital content piracy and copyright protection policies on product quality, firm profitability, consumer surplus, and social welfare when consumers exhibit loss aversion in the quality dimension. Specifically, consumers are initially uncertain about the product quality and will form an expectation, but once they buy the licensed product or use piracy, they know the actual product quality and compare it with their expectation. When consumers are loss averse, consumer propensity to an option is more negatively affected by product quality above the expectation than positively affected by product quality below the expectation. Our analysis shows that although piracy exerts a negative cannibalization effect in the absence of loss aversion, it can exert an additional positive information effect when the degree of loss aversion on the licensed product is higher than the degree of loss aversion on piracy. We find that when the information effect dominates the cannibalization effect, piracy can lead to a win-win situation for firm profitability and consumer surplus. Moreover, under certain circumstances, anti-protection policies can simultaneously raise product quality, firm profitability and consumer surplus. The rationale behind the positive impacts of piracy and anti-protection policies is rooted in the influences of loss aversion behavior on consumer purchase decisions. The results show that it is essential to quantify the degree of consumer loss aversion for firms in formulating pricing and quality strategies and for policymakers to develop copyright protection policies.</p>

scholarly journals The Influence of Product Quality Comparative Testing Results on the Market

Ekonomika ◽  
2005 ◽  
Vol 72 ◽  
Author(s):  
Juozas Ruževičius
Keyword(s):  
Product Quality ◽  
Product Information ◽  
Consumer Products ◽  
Consumer Information ◽  
Consumer Society ◽  
Comparative Testing ◽  
Product Testing ◽  
Governmental Institutions ◽  
Public Organisations ◽  
The Baltic

The main purpose of this article has been to prove the influence of product quality comparative testing results on the market, to demonstrate the importance of comparative testing of consumer products as a means of consumer information and consultation, to analyse its methodology and impact on market structures as well as on the behaviour of companies and consumers, and to determine possibilities for the practical application of comparative testing in Lithuania. The key objectives have been to analyse the framework of Lithuanian governmental institutions and public organisations responsible for the formulation and implementation of consumer policies, and their capabilities to perform product testing. In addition, peculiarities of the consumer market as well as the need for product information, which are both important factors for product testing, have been overviewed.Utilising comparative product testing methodology and research on how test results could be applied, it can be said that the formation of an independent, well-informed consumer base able to make calculated decisions requires planned and concentrated governmental efforts. Comparative product testing is one of the tools available for consumer education and information. Its significance and effectiveness in creating a consumer society such as this cannot be denied.When creating a comparative product testing system in Lithuania we need to take into account the experience of other Western countries in this field, as well as the potentiality of Lithuanian institutions to prepare and conduct testing of certain products. Research shows that at present in Lithuania it is food products which lend themselves most readily to product testing, while services fare worst. From the technological and economic viewpoints, co-operation among the Baltic States and any prior specialisation in this area would be useful when conducting product quality comparative testing.

Competitive Effects of Purchase-Based Targeted Advertising

2012 ◽  
Vol 10 (4) ◽  
pp. 71-84
Author(s):  
Jianqiang Zhang ◽  
Weijun Zhong ◽  
Shue Mei
Keyword(s):  
Social Welfare ◽  
Product Differentiation ◽  
Price Competition ◽  
Consumer Surplus ◽  
Consumer Information ◽  
Competitive Effects ◽  
Targeted Advertising ◽  
Consumer Valuation ◽  
Competitive Environments ◽  
Second Period

This paper develops a two-period sales model to investigate the competitive effects of purchase-based targeted advertising. In the model, two competing firms gain consumer information during the first period sales, which allows them to target advertising based on consumer purchase history. Advertising is assumed to be persuasive in terms of consumer valuation enhancing and product differentiation increasing. The authors find that the firm’s ability to target can damage industry profits, consumer surplus, and even social welfare. The conditions under which targeted advertising is positive or negative are derived, showing that price competition is softened in the second period but intensified in the first. It is suggested that firms under competitive environments cautiously sponsor targeted advertising with appropriate contents.

scholarly journals Accelerating the Social Media Process: The Impact of Internet Celebrity Word-of-Mouth Communication and Relationship Quality on Consumer Information Sharing

2020 ◽  
Vol 10 (1) ◽  
pp. 201
Author(s):  
Liping Liu ◽  
Chih-Cheng Fang
Keyword(s):  
Social Media ◽  
Information Sharing ◽  
Relationship Quality ◽  
Information Acquisition ◽  
Word Of Mouth ◽  
Rapid Development ◽  
Consumer Information ◽  
Research Fields ◽  
Word Of Mouth Communication ◽  
The Impact

With the rapid development of "Internet plus", the number of Internet users in China has increased rapidly, and the number of active users of social media software ranks first in the world. Large Numbers of network users are also potential consumer groups. Social media influences other consumers through consumer interaction and social interaction, and consumers are transformed into active information acquisition rather than passive information reception. Word of mouth marketing on social media has become one of the hottest research fields. Based on the information adoption model, this study explores the impact of internet celebrity word-of-mouth communication on consumer information sharing from four dimensions: internet celebrity word-of-mouth communication, relationship quality, face consciousness, and consumer information sharing and establishes a research model to provide references and suggestions for subsequent researchers and enterprise management.

scholarly journals Empirical Study on the Evaluation Model of Public Satisfaction With Local Government Budget Transparency: A Case From China

SAGE Open ◽  
2020 ◽  
Vol 10 (2) ◽  
pp. 215824402092406 ◽  
Author(s):  
Qiuxian Hu ◽  
Leibao Zhang ◽  
Wenyu Zhang ◽  
Shuai Zhang
Keyword(s):  
Local Government ◽  
Information Acquisition ◽  
Structural Equation ◽  
Online Survey ◽  
Information Quality ◽  
Perceived Quality ◽  
Equation Modeling ◽  
Government Budget ◽  
The Government ◽  
Local Government Budget

For policymakers across the world, the importance of budget transparency is self-evident. However, most scholars mainly focus on the economic performance of budget transparency while ignoring satisfaction of the public as the recipients of this policy. Therefore, this study examines the main factors of public satisfaction with the local government budget transparency based on the theory of customer satisfaction in the context of the Chinese budget transparency policy. Data for this study were collected through an online survey involving 235 participants. Structural equation modeling (SEM) was employed to examine the proposed model. The results indicate that the budget information quality, budget information acquisition method, and public engagement are good indicators of budget transparency perceived quality, which are positively related to public satisfaction. The government image also exerts a positive effect toward public satisfaction. Furthermore, public satisfaction is also positively related to public trust toward the local government, even though the hypotheses linking public expectation to public satisfaction, and to budget transparency perceived quality are statistically insignificant. The implications of promoting budget transparency and suggestions for future work are also included in this study.

When do consumers value ethical attributes? The role of perceived quality in gift-giving

2020 ◽  
Vol 55 (1) ◽  
pp. 315-335
Author(s):  
Gopal Das ◽  
John Peloza ◽  
Geetika Varshneya ◽  
Todd Green
Keyword(s):  
Product Quality ◽  
Field Study ◽  
Underlying Mechanism ◽  
Perceived Quality ◽  
Societal Implications ◽  
Gift Giving ◽  
Content Type ◽  
Non Profit ◽  
Product Categories

Purpose Although research demonstrates the importance of ethical product attributes for consumers, a prior study has not examined the role of consumption target (i.e. self-purchases vs gift-giving) on consumers’ preference for products with ethical attributes. Notably, consumers’ preference for quality can differ between self-purchases and gifts, and the presence of ethical attributes can impact product quality perceptions. The purpose of this paper is to examine how the presence of ethical attributes alters decision-making in a gift-giving context using perceptions of product quality as an explanatory variable for these differences. Design/methodology/approach One field study and two controlled experiments test the proposed hypotheses. The experiments were conducted across different product categories and samples. Findings Results showed that the presence of an ethical attribute leads to higher purchase intentions for products in a gift-giving context compared to self-purchase. Perceived quality mediates this effect. Further process evidence through moderation, including resource synergy beliefs, support the findings. This paper discusses the theoretical, managerial and societal implications of these results. Research limitations/implications Although care was taken to select products to enhance generalizability, the studies presented here are limited to two products. Further, although the present research includes a field study with actual charity-related purchases, the role of time pressures is not explicitly explored. Finally, the role of brand-self connections is not explored in the current research. The ability for a donor to integrate the mission of a charity into their self-perception or the potential for social normative influences to impact behaviors remains open for exploration. Practical implications Charities are facing increasing pressures to raise sustainable funds to support their missions. The research provides guidance to marketers and fundraisers in the non-profit sector that allows them to direct more focused fundraising appeals to donors and adapt their fundraising efforts to create a fit between their audience and fundraising appeals. Originality/value This research demonstrates that consumption target (purchasing for the self versus purchasing for others) is a vital contextual factor that influences customer preference for ethical attributes. These results complement the extant literature by exploring the underlying mechanism behind consumers’ responses to the ethical attributes in the case of self-purchase and other-purchase. The underlying effect is supported theoretically by resource synergy beliefs.

A Behavioral Process Approach to Information Acquisition in Nondurable Purchasing

1978 ◽  
Vol 15 (4) ◽  
pp. 532-544 ◽  
Author(s):  
Jacob Jacoby ◽  
Robert W. Chestnut ◽  
William A. Fisher
Keyword(s):  
Information Search ◽  
Information Acquisition ◽  
Consumer Information ◽  
Behavioral Process ◽  
The Mean ◽  
The Individual ◽  
Attitudinal Brand Loyalty ◽  
Available Information ◽  
Relationship Of ◽  
The Relationship

A behavioral process method was used to explore the relationship of individual difference factors to consumer information acquisition behavior. Findings included: (1) the mean proportion of available information actually acquired was 2%, and (2) information search was concentrated on six of the 35 available information dimensions; increased information acquisition was related (3) positively to the product's importance for the individual, (4) positively to being an optimizer rather than a satisficer, (5) positively to high amounts of past purchasing experience with the product, and (6) negatively to attitudinal brand loyalty.

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