Consumer deliberation and product line design

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

105 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)995-1007
Journal / PublicationMarketing Science
Volume31
Issue number6
Publication statusPublished - Nov 2012
Externally publishedYes

Abstract

This paper studies optimal product line design when consumers need to incur costly deliberation to uncover their valuations for quality. To induce deliberation, a firm must maintain quality dispersion and cut the price of the high-end product so that consumers are motivated to deliberate in the hope that high-end consumption fits their needs. To prevent deliberation, the firm may have to offer downgraded quality at a low price so that an impulsive purchase will not appear too wasteful. Whether the firm should induce deliberation depends on how much surplus it creates by aligning the supply of quality with heterogeneous demand for quality and how much surplus it captures during this process. Interestingly, equilibrium firm profit, consumer surplus, and social welfare can all increase with the cost of deliberation. We extend the model to accommodate consumers' heterogeneous prior beliefs of their valuations for quality. We also discuss how market research could benefit from taking into account the endogeneity of consumer deliberation. © 2012 INFORMS.

Research Area(s)

  • Agency theory, Consumer deliberation, Information acquisition, Preference construction, Price discrimination, Product line design

Bibliographic Note

Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

Citation Format(s)

Consumer deliberation and product line design. / Guo, Liang; Zhang, Juanjuan.
In: Marketing Science, Vol. 31, No. 6, 11.2012, p. 995-1007.

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review