Managing Consumer Deliberations in a Decentralized Distribution Channel

Xi Li (), Yanzhi Li () and Mengze Shi ()
Additional contact information
Xi Li: College of Business, City University of Hong Kong, Kowloon, Hong Kong
Yanzhi Li: College of Business, City University of Hong Kong, Kowloon, Hong Kong
Mengze Shi: Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada

Marketing Science, 2019, vol. 38, issue 1, 170-190

Abstract: Consumers may incur deliberation costs in learning about their valuations for new products. When the deliberation cost is not trivial, the retailer may set a low price to inhibit deliberation ( regressive pricing ) or choose a high price to induce deliberation ( transgressive pricing ). In a decentralized channel, we find that, first, the retailer is more likely to adopt the regressive pricing (versus transgressive pricing) when the wholesale price is lower. In response, the manufacturer sets a high (low) wholesale price to induce the transgressive (regressive) pricing when the deliberation cost is intermediate (high). Second, channel members can be misaligned in the incentive in investing in consumer empowerment. The ability to empower consumers and reduce their deliberation costs enhances the retailer’s channel power and its share of channel profit. Finally, the manufacturer may offer a socially suboptimal product quality because a high quality can lead to excessive deliberation. These nontrivial effects of the deliberation cost underscore the importance of considering consumer deliberations in channel management. The insights are robust under a positive production cost, heterogeneous deliberation costs, continuous deliberation efforts, and a channel structure with multiple layers.

Keywords: consumer deliberation; channel management; consumer empowerment; pricing; product quality (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://doi.org/10.1287/mksc.2018.1120 (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:38:y:2019:i:1:p:170-190

Access Statistics for this article

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