Omnichannel management with consumer disappointment aversion

Shaofu Du, Li Wang and Li Hu

International Journal of Production Economics, 2019, vol. 215, issue C, 84-101

Abstract: With the popularity of omnichannel retailing, consumers are sophisticated enough to make strategic channel decisions, considering the possible disappointment for an unexpected outcome induced by various uncertainties from online and offline channels. Value uncertainty online can trigger low-value disappointment, and availability uncertainty offline may cause stock-out disappointment. This study characterizes the effect of consumers' anticipated disappointment aversion behavior on the optimal pricing decisions of retailers with or without inventory constraint in the omnichannel environment. When a retailer operates in dual-channel and faces offline inventory constraint, the concern for consumers' homogeneous disappointment aversion changes the threshold above which the retailer implement different channel pricing strategies. Then, we show how the negative impact of disappointment on profit and market can be mitigated by physical showroom mechanism, which is increasingly adopted by omnichannel management. Introduction of a cost-effective physical showroom expands the market by relaxing the restriction of stock-out disappointment and improves profit as long as consumers' low-value disappointment is high enough. Interestingly, the low-value disappointment benefits the omnichannel in expanding the market coverage by alleviating the constraint exerted by stock-out disappointment. Further discussions regarding the disappointment behavior are derived from the extension of consumers’ heterogeneity in disappointment-aversion.

Keywords: Omnichannel management; Disappointment aversion; Consumer strategic option; Behavioral pricing (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527318301932
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:215:y:2019:i:c:p:84-101

DOI: 10.1016/j.ijpe.2018.05.002

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().