Product Fit Uncertainty and Information Provision in a Distribution Channel

Monic Sun and Rajeev K. Tyagi

Production and Operations Management, 2020, vol. 29, issue 10, 2381-2402

Abstract: Consumers of experience goods typically face some uncertainty about the fit between their tastes and the features of products being offered. Information technology has given consumers the ability to conduct research online about their potential fit with products before buying, and modern sellers the ability to disseminate product information to consumers. This study investigates a manufacturer’s and retailers’ incentives to disclose such product fit information to consumers when the manufacturer sells to consumers through competing retailers. We show that whether a manufacturer selling through retailers is more or less likely to disclose fit information compared to a manufacturer selling directly to consumers depends on the degree of retail competition. If the disclosure decisions are made before the manufacturer sets its wholesale price, then all channel members want to disclose fit information for low‐quality products, no one wants to disclose it for medium‐quality products, and only the retailers prefer to disclose fit information for high‐quality products. This disclosure conflict for high‐quality products can be resolved if the manufacturer can commit to a wholesale price before the disclosure decisions. The retailers also then prefer to not disclose fit information for high‐quality products. Regardless of whether the wholesale price is set before or after disclosure decisions, a mandatory product‐fit disclosure policy can decrease consumer welfare and social surplus, depending on the level of product quality and the degree of retail competition.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
https://doi.org/10.1111/poms.13237

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:bla:popmgt:v:29:y:2020:i:10:p:2381-2402

Ordering information: This journal article can be ordered from
http://onlinelibrary ... 1111/(ISSN)1937-5956

Access Statistics for this article

Production and Operations Management is currently edited by Kalyan Singhal

More articles in Production and Operations Management from Production and Operations Management Society
Bibliographic data for series maintained by Wiley Content Delivery ().