A model of product design and information disclosure investments
AuthorMarkopoulos, Panos M.
PublisherAffiliation: Business and Public Administration, University of Cyprus, P.O. Box 20537, Nicosia, CY-1678, Cyprus
Affiliation: Wharton School, University of Pennsylvania, 3730 Walnut Street, Philadelphia, PA 19104, United States
Correspondence Address: Business and Public Administration, University of Cyprus, P.O. Box 20537, Nicosia, CY-1678, Cyprus
SourceInternational Conference on Information Systems (ICIS 2013): Reshaping Society Through Information Systems Design
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As information availability for products and services is increasing and as consumers engage in more online search prior to purchase decisions, it is becoming more important for firms to know when to invest to reduce consumer uncertainty. We argue that today's firms should view product design and investments to reduce consumer uncertainty as an integrated process, which is in turn heavily influenced by how much information consumers can obtain independently, for example, by reading product reviews or through third party infomediaries. Using a game-theoretic model, we explain how product quality decisions influence future investments to reduce consumer uncertainty, and demonstrate how firms should take this dependency into account to avoid over-investing in quality. We also show that firms can free ride on the product information already available in the market by third-party infomediaries, and reduce their own disclosure investments. We show that this is especially true for lower quality firms. © (2013) by the AIS/ICIS Administrative Office All rights reserved.
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