Quality disclosure strategies for small business enterprises under consumer loss aversion
In this paper, we focus on small business enterprises (SBEs) that usually have low market power but can rely on retailers to transact sales and gain the ability to disclose quality information. Moreover, consumer loss aversion (CLA) is pronounced when buying from SBEs that have yet to develop a stro...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
KeAi Communications Co., Ltd.
2024-03-01
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| Series: | Journal of Management Science and Engineering |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2096232023000598 |
| _version_ | 1797263617992687616 |
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| author | Danli Yao Simai He Meng Zheng |
| author_facet | Danli Yao Simai He Meng Zheng |
| author_sort | Danli Yao |
| collection | DOAJ |
| description | In this paper, we focus on small business enterprises (SBEs) that usually have low market power but can rely on retailers to transact sales and gain the ability to disclose quality information. Moreover, consumer loss aversion (CLA) is pronounced when buying from SBEs that have yet to develop a strong reputation and uncertain quality. We focus on two competing SBEs with heterogeneous quality levels and discuss their quality disclosure strategies— whether selling through a retailer— in the context of CLA. We study the interaction between consumers' prior belief in product quality and CLA and how these factors affect equilibrium outcomes. We show that a situation in which low-quality and high-quality SBEs both choose to disclose will not occur under a neutral consumer attitude, i.e., it happens only when the aversion level is significant. When the aversion level is low, either the low-quality SBE or the high-quality SBE will decide to disclose, and the disclosing party depends on the prior belief. In addition, CLA significantly impacts the monotonicity of both SBEs' and retailers' prices and profits relating to the consumers' prior beliefs. |
| first_indexed | 2024-03-08T12:52:31Z |
| format | Article |
| id | doaj.art-8b46548940b045c59b0ea18513cf705e |
| institution | Directory Open Access Journal |
| issn | 2096-2320 |
| language | English |
| last_indexed | 2024-04-25T00:15:52Z |
| publishDate | 2024-03-01 |
| publisher | KeAi Communications Co., Ltd. |
| record_format | Article |
| series | Journal of Management Science and Engineering |
| spelling | doaj.art-8b46548940b045c59b0ea18513cf705e2024-03-13T04:45:21ZengKeAi Communications Co., Ltd.Journal of Management Science and Engineering2096-23202024-03-01916287Quality disclosure strategies for small business enterprises under consumer loss aversionDanli Yao0Simai He1Meng Zheng2Business School, University of Shanghai for Science and Technology, Shanghai, 200093, ChinaSchool of Information Management and Engineering, Shanghai University of Finance and Economics, Shanghai, 200433, ChinaSchool of Information Management and Engineering, Shanghai University of Finance and Economics, Shanghai, 200433, China; Corresponding author.In this paper, we focus on small business enterprises (SBEs) that usually have low market power but can rely on retailers to transact sales and gain the ability to disclose quality information. Moreover, consumer loss aversion (CLA) is pronounced when buying from SBEs that have yet to develop a strong reputation and uncertain quality. We focus on two competing SBEs with heterogeneous quality levels and discuss their quality disclosure strategies— whether selling through a retailer— in the context of CLA. We study the interaction between consumers' prior belief in product quality and CLA and how these factors affect equilibrium outcomes. We show that a situation in which low-quality and high-quality SBEs both choose to disclose will not occur under a neutral consumer attitude, i.e., it happens only when the aversion level is significant. When the aversion level is low, either the low-quality SBE or the high-quality SBE will decide to disclose, and the disclosing party depends on the prior belief. In addition, CLA significantly impacts the monotonicity of both SBEs' and retailers' prices and profits relating to the consumers' prior beliefs.http://www.sciencedirect.com/science/article/pii/S2096232023000598Quality disclosureConsumer loss aversionCompetitionGame theory |
| spellingShingle | Danli Yao Simai He Meng Zheng Quality disclosure strategies for small business enterprises under consumer loss aversion Journal of Management Science and Engineering Quality disclosure Consumer loss aversion Competition Game theory |
| title | Quality disclosure strategies for small business enterprises under consumer loss aversion |
| title_full | Quality disclosure strategies for small business enterprises under consumer loss aversion |
| title_fullStr | Quality disclosure strategies for small business enterprises under consumer loss aversion |
| title_full_unstemmed | Quality disclosure strategies for small business enterprises under consumer loss aversion |
| title_short | Quality disclosure strategies for small business enterprises under consumer loss aversion |
| title_sort | quality disclosure strategies for small business enterprises under consumer loss aversion |
| topic | Quality disclosure Consumer loss aversion Competition Game theory |
| url | http://www.sciencedirect.com/science/article/pii/S2096232023000598 |
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