Consumer Deliberation and Product Line Design

Liang Guo and Juanjuan Zhang

Marketing Science, 2012, vol. 31, issue 6, 995-1007

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.

Keywords: consumer deliberation; product line design; price discrimination; information acquisition; agency theory; preference construction (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (59)

Downloads: (external link)
http://dx.doi.org/10.1287/mksc.1120.0736 (application/pdf)

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:inm:ormksc:v:31:y:2012:i:6:p:995-1007

Access Statistics for this article

More articles in Marketing Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().