Price Premium and Seller Reputation --- A Comparative Study

Project: Research

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Researcher(s)

Description

Should a higher-reputation seller charge a higher price compared to its lower-reputation counterpart? The message is mixed in literature. Motivated by the contradictory findings, this project aims to understand the pricing strategies of sellers with different quality, (specifically, the reputation levels,) and examine whether, and under what conditions, should a high reputation seller sets a high price. We identify several key factors that determine whether a high-reputation seller enjoys a price premium: (1) the competition among the high-reputation sellers; (2) the proportion of informed consumers who are able to search for the most ideal price/quality combination, vs. uninformed consumers who settle for the product at their first search. We plan to build a theoretical model to understand firms’ pricing strategy as well as factors that affect firms’ strategy; then, we will collect empirical data from different marketplaces to verify, and demonstrate our theoretical findings.

Detail(s)

Project number7008118
Grant typeSRG
StatusFinished
Effective start/end date1/05/1116/04/13