Strategic Use of Product Delays to Shape Word-of-Mouth Communication

Alexei Parahonyak and Nick Vikander

No 1032, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: This paper investigates the advantages a seller can gain by strategically creating product scarcity to manipulate consumer word-of-mouth communication. The seller offers a product of uncertain quality and sets a service speed that determines whether opinion leaders are immediately served or delayed when attempting to purchase the product. Opinion leaders subsequently share their experiences with other consumers, influencing these consumers’ beliefs about product quality and their purchase de cisions. We show that delaying opinion leaders can significantly impact consumer learning by altering both the content and level of word-of-mouth communication. Specifically, the content effect alone can incentivize the seller to delay opinion leaders, except in niche markets where private information is highly accurate. In settings where information about purchased products spreads more easily than information about delays, the level effect limits the potential for suppressing service speed, particularly in markets with high expected product quality and many opinion leaders.

Date: 2024-01-12
New Economics Papers: this item is included in nep-com and nep-mic
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