Research in Progress
Through the generous donations of our partners and sponsors we are able to provide funding for a wide variety of ongoing retail research projects at the University of Alberta. Current projects are listed below.
Congratulations to our 2011- 2012 Seed Grant Recipients!
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Dorothee Feils, Assistant Professor of International Business, University of Alberta
As retailers face low growth rates in their home countries and in many developed economies, they are looking increasingly at entering fast-growing transition and developing economies such as Brazil, China and India. Retailers have a choice of different models to enter foreign markets: accquisitions, greenfield investments, joint ventures and franchising. Choosing the right mode to enter a foreign market may determine the long-run success of the foreign operations. A number of different factors have been suggested at a theoretical level as deteminants of retailers' market entry mode, such as the attractiveness of the foreign market and the foreign countries' institutional environment. In this study I will examine the impact of a country's institutional environment on retailers' mode of entry choice and performance.
The Singaling Effect of Search: Customer Preference for "Out-of-Sight" Alternatives
Gerald Häubl, Associate Professor & Canada Research Chair, University of Alberta
This research project challenges the common view that it is always in the best interest of a seller (either a retailer or a manufacturer) to make it as easy as possible for consumers to access its offerings. By contrast, we propose that consumers make inferences about their own preferences based on how much effort they must exert in order to find out about a specific product or to visit a particular store, and that this can boost preference for products or stores that are initially "out of sight" and that consumers discover only if they decide to invest the effort required. A series of studies will examine this phenomenon and attempt to pinpoint the conditions under which preference for products and stores does indeed increase as a consequence of them being initially out of sight. The findings of this research will have practical implications for the design/layout of (physical and virtual) stores, for shelf-space management, and for store location decisions.
Signaling Value through Retail Assortment
Yuanfang Lin, Assistant Professor of Marketing, University of Alberta
When it comes to the purchase decision in a retail environment, an uncertainty consumers commonly encounter is whether the price they pay is reflective of the product quality, or it is the result of high retail markup. This project studies the retailer’s decision in assortment and pricing by offering an explanation for when and how a retailer of high-end product can signal its profit margin due to different cost types to consumers who have the option of resolving uncertainty through searching. The research findings are expected to provide managerial recommendations to retail marketing practitioners in the areas of product selection, pricing and promotional message designs.
New Models of Asymmetric Competitive Structure
Paul R. Messinger, Associate Professor of Marketing, University of Alberta
This research is designed to make possible the creation of maps of product differentiation and competition using store-level sales data recorded using the widely available scanner barcode system. Structural maps of product differentiation and competition previously required separate surveys, and a question always remained as to whether perceived substitution relations recorded in surveys are realized in actual purchase behaviour. Brand maps made from sales data avoid this problem. A practical feature of our approach is that it makes use of data already collected by and available to most retailers. A conceptual contribution of our work is that our models describe power relations across brand-pairs, as an addition to earlier perceptual mapping techniques. The basis for the proposed models consists of the idea that inter-brand competition is revealed in patterns of substitution and relative power (as measured by cross-price elasticities or by the covariance of brand preferences). Methodologically our models apply recent advances in statistical methods.
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Sarah Moore, Assistant Professor of Marketing, University of Alberta
Though some acts of consumption are carried out alone, we frequently spend time—and consume—with the others around us, for example, splitting a bottle of wine, or treating a friend to lunch. However, little research has examined how consumers make choices in these social consumption situations. Since others are so important to our physical and psychological well-being, one might predict that we would behave generously rather than selfishly when making collective decisions, and emphasize others preferences over our own. For example, when dining out with vegetarians, we might choose a vegetarian-friendly restaurant rather than a steak house, even though we might prefer steak.
However, not everyone is naturally disposed to make self-sacrificing choices. Independent individuals tend to emphasize self-preferences in decision-making, while interdependent individuals naturally balance self and other preferences. For interdependents, then, “choosing like a good friend” should come easily; indeed, we find that in choosing for self and others, interdependents make consistently “friend-friendly” choices regardless of their own preferences. Specifically, when choosing wine for the table at a restaurant, interdependent individuals choose equally priced red and white wines, regardless of their own wine preferences. In contrast, when choosing for self and others, independents struggle with behaving like a good friend and satisfying their own preferences. Yet, rather than dependably forgoing their relationships or their personal preferences, independents skillfully balance self and other in social consumption situations: they generally behave selfishly—but only when their selfishness can be hidden from the group. We find that, when choosing for themselves and one other person, independent individuals choose equally priced red and white wines regardless of their own preferences, since selfishness is difficult to hide in this setting. However, when choosing for a larger a group, selfishness is easier to hide, and independents choose a more expensive bottle of the wine that matches their own preference, and choose a cheaper bottle of their less preferred wine for the group.
2010-2011 Seed Grant Research
The Signature Effect: How Signing One’s Name Influences Consumption-Related Behavior
Gerald Häubl, Associate Professor & Canada Research Chair, University of Alberta
Keri Kettle, Doctoral Candidate, University of Alberta
This research project examines how asking consumers to provide their signature affects how they search for product information and make purchase decisions in retail settings. Evidence from our initial studies suggests that signing heightens a consumer’s sense of self, which in turn influences how s/he responds to various situational cues in a shopping context. For instance, signing one’s name causes an increase in consumer engagement (amount of time spent in the store, number of products examined, etc.) when shopping in product categories that are closely associated with one’s identity, but a reduction in engagement in connection with domains that are not closely tied to one’s identity. A deeper understanding of the psychological processes that underlie this effect will point to important practical implications for retailers – for example, by identifying specific circumstances under which asking shoppers to provide their signature might increase store sales.
Determinants of Vehicle Purchase Decisions - Does Marketing Gas Mileage Matter?
Andrew Leach, Assistant Professor of Business Economics, University of Alberta
Our research objective is to understand the simultaneous effects of gasoline prices and marketing activities on the sales of vehicles. Although a great deal of research in economics has examined the effects of changing fuel prices on consumer durable sales it has not accounted for the endogenous effects of marketing activities. Our research is designed to address this oversight with a unique data set which tracks vehicles sales, prices, and characteristics, as well as marketing activities (advertising intensity, advertising appeals, and product quality) and macroeconomic data over a 21-year period. We expect that these data will show a strong correlation between fuel prices and the marketing intensity of more fuel-efficient vehicles, and that this will in turn be correlated with higher purchases of these vehicles. If we are able to show that the marketing effect is important independently from the fuel price effect, this would suggest that previous economic work over-estimates the role of fuel prices in driving purchase decisions.
Persuasive Advertising in a Vertically Differentiated Competitive Marketplace
Yuanfang Lin, Assistant Professor of Marketing, University of Alberta
Advertising has long been regarded as “second to product itself” as the most important area to allocate incremental dollars. Every year retailers of automobiles, consumer electronics invest in billions of dollars in advertising to help sell their product. This study focuses on a rich variety of retail advertising which serves not on conveying hard information but to persuade consumers by altering their tastes or creating subjective product differentiation and brand loyalty in the mind of consumers. Despite the well acknowledged existence, prior research on persuasive advertising is generally fairly vague about exactly how such advertising may affect consumer preferences. This project fills in the gap of marketing research by proposing and empirically testing three genuine ways of persuasive advertising affecting consumer taste in a vertically differentiated product market. The research findings are expected to provide managerial recommendations to retail marketing practitioners on the design, target as well as implementations of promotional activities to the end consumers.
Pricing Systems for Services
Paul R. Messinger, Associate Professor of Marketing, University of Alberta
Pricing for services is an increasingly important topic reflecting a shift to service-based business in modern economies, but a key open issue for services is how to price them. For example, there are competing models of video game pricing, involving free service, with add-ons that consumers are charged for; monthly fees; or a fixed fee for purchase of a software disk. For cell phones, contracts are often used, with a fixed-fee charged for use of a set quantity of “free minutes” and a variable fee for each minute above this quantity. There is still lack of consensus (and a lack of an overarching theory) as to what constitutes the most suitable pricing system to fit the various service contexts. In this area, this research will develop an analytical model of rational customer choice between available service plans. We study the applicability of such a model, particularly in the context of pricing plans used widely for cell phone services (three-part tariffs). We argue that consumers will proactively engage in a behavior of avoiding service usage beyond the tariff’s “free” allowance, and that consumers are more sensitive to “overages” than to “underages,” which is not entirely consistent with a model of rational behavior. Lastly, we examine ethical issues associated with Negative Options Billing, a practice in which services are provided automatically and the customer must either pay for the service or specifically decline it in advance of billing. According to a survey conducted by Visa, “29 percent of U.S. consumers said they have had unauthorized recurring charges on their credit or debit card each month as a result of an offer they accepted online.” Such practices are coming under increased regulatory scrutiny, and ethical frameworks describing when such practices are desirable or reasonable are very much needed.
You must buy now! Brand personality and consumer response to pushy promotions
Sarah Moore, Assistant Professor of Marketing, University of Alberta
Retailers frequently advertise to inform consumers about their products and to encourage them to buy. However, the language used in advertisements is often in the form of imperative commands (e.g. buy now!). Such imperatives can decrease the effectiveness of public policy messages by triggering negative responses from individuals. We examine how consumers respond to the use of imperative or “pushy” advertising language in the marketplace. How do consumers evaluate ads that use imperative commands? How likely are consumers to purchase after seeing an imperative ad? Are such responses always negative, or might consumers respond differently to imperative advertising depending on the brand doing the advertising? We find that brands with certain personalities can use imperative advertising language with no negative consequences: consumers like ads from exciting brands (e.g. Virgin Mobile, Abercrombie & Fitch) equally well whether they contain an imperative or not. However, consumers like ads from sincere brands (e.g. Hallmark, The Gap) much less when they contain an imperative. Further, when sincere brands use imperative advertising language, consumers trust the brand less; this has long term implications for their relationship with the brand. These findings highlight variables that retailers can control, such as language and brand personality, in managing consumer responses to advertising.
Does Higher Transparency Lead to More Search in Online Auctions
Peter T.L. Popkowski-Leszczyc, Associate Professor of Marketing, University of Alberta
Ernan Haruvy, Associate Professor, The University of Texas at Dallas
Yu Ma, Assistant Professor of Marketing, University of Alberta
In a controlled field experiment, we examine pairs of auctions for identical items under different conditions. We find that auction design features that are under the control of the auctioneer-- including information transparency, number of simultaneous auctions, and the degree of overlap between simultaneous auctions—affect bidder search and choice. Clickstream data show that a significant relationship between information transparency and price dispersion can be linked to search. Specifically, the effect of information transparency on price dispersion is fully mediated by lookup behavior. Combining these findings, we make auction design recommendations.
A Practical Approach to Choice Set Formation Modeling with Many Alternatives
Joffre Swait, Professor of Marketing, University of Alberta
Most categories carried by modern retailing firms contain many alternative product offerings that differ by brand, formulation, size, packaging type, etc. Thus, it is natural that consumers develop over time and experience a tendency to choose from among only a handful of such offerings: as a coping mechanism, consumers develop choice sets (subsets of the retail offering) that they seriously examine when making purchase. These may be brand-, size-, or formulation-based (or indeed, use other product attributes, or even combinations of these), implying that consumers restrict their attention to these subsets.
Statistical models that attempt to forecast demand for these products have had to ignore the possibility of choice sets as part of consumers’ decision process when treating categories with more than a few alternatives (say, more than 10). The purpose of this project is to develop a practical method for choice set formation modeling that allows statistical models of demand to handle large choice sets. This will improve our ability to forecast demand for such categories, give us a better idea of the underlying competitive structure in a category, and lead to product designs more closely suited to the market place.
2009-2010 Seed Grant Research
Tunnel Vision: Local Behavioral Influences on Consumer Decisions in Product Search
Gerald Haubl,Associate Professor & Canada Research Chair, University of Alberta
Benedict G. C. Dellaert, Erasmus School of Economics, Erasmus University Rotterdam
Bas Donkers, Erasmus School of Economics, Erasmus University Rotterdam
We introduce and test a behavioral model of consumer product search that extends a baseline normative
model of sequential search by incorporating nonnormative influences that are local in the sense that they
reflect consumers’ undue sensitivity to recently encountered alternatives. We propose two types of such local
behavioral influences that, at each stage of a search process, can manifest themselves both in which of the
products inspected up to that point is deemed to be the most preferred one (the product comparison decision) and whether to terminate the search at that stage (the stopping decision). The first of these influences is that consumers respond excessively to the attractiveness of the currently inspected product, at the expense of all others (“focalism”). The second proposed behavioral influence is that consumers overreact to the difference in attractiveness between the current product and the one encountered just prior to it (“local contrast”). Converging evidence from two experiments, which combine to guarantee both high internal and high external validity, provides support for the proposed behavioral influences. Our findings demonstrate that consumers’ product comparison and stopping decisions in sequential product search are jointly governed by normative principles and by the proposed local behavioral influences.
Searching in Choice Mode: Consumer Decision Processes in Product Search with Recommendations
Gerald Haubl,Associate Professor & Canada Research Chair, University of Alberta
Benedict G. C. Dellaert, Erasmus School of Economics, Erasmus University Rotterdam
This article examines how a common form of decision assistance— recommendations that present products in order of their predicted attractiveness to a consumer—transforms decision processes during product search. Such recommendations induce a shift in consumers’ decision orientation in search from being directed at whether additional alternatives should be inspected to identifying the best alternative among those already encountered, which is common when choosing from predetermined sets of alternatives. that is, recommendations cause consumers to search in “choice mode.” evidence from three studies provides support for such a transformation of search decisions, which manifests itself in two respects. First, compared with unassisted search, recommendations lead consumers to assess a product they encounter in their search by comparing it less with the best one discovered up to that point and more with other previously inspected alternatives. Second, recommendations transform how variability in product attractiveness affects stopping decisions such that greater variability causes consumers to search less, which is contrary to what is commonly observed in search without recommendations.
A Dual Process Theory for Service Evaluation
Paul R. Messinger, Associate Professor of Marketing, University of Alberta
Adam Finn, Chairman, Professor, and Banister Chair in Marketing, University of Alberta
Raymond A. Patterson, Erik Rolland, Keith F. Ward
We introduce this special issue by addressing seven key challenges associated with managing hybrid human/automated service systems. These consist of the following:
1. What strategic and tactical issues arise when managing hybrid service systems?
2. How should the core “value proposition” be set?
3. What special considerations arise in the design and implementation phases?
4. How can service delivery be managed to identify systemic problems and to address service breakdowns?
5. How can communications with clients improve the functioning of service systems?
6. What performance measures should be used to monitor process, outputs, client perceptions, and financial outcomes?
7. How can we coordinate the various interdisciplinary activities needed to address the previous six issues?
Seven Challenges to Combining Human and Automated Service
Paul R. Messinger, Associate Professor of Marketing, University of Alberta
Jin Li, Eleni Stroulia, Dennis Galletta, Xin Ge, and Sungchul Choi
We find evidence for different evaluation processes when customers report on their service experience. When the experience is positive, as indicated by the customer’s willingness to recommend the service to a friend, not only is the mean satisfaction response high, the functional form used to determine overall satisfaction is conjunctive. When the experience is negative, the mean satisfaction response is lower, and the functional form used to determine overall satisfaction is found to be compensatory. This means that different cognitive processes are at work when a consumer reports an overall positive experience with a service encounter compared to when the consumer reports an overall negative experience. These findings are based on an examination of a large dataset of outpatient healthcare customer satisfaction surveys.
Yes, We Have No Bananas: Consumer Response to Stockouts
Sarah Moore, Assistant Professor of Marketing, University of Alberta
When consumers experience a stockout, two responses are possible: source negativity, or frustration with the store that is stocked out, and product desirability, or an increased desire for the unavailable good. We investigate how these two responses affect customer satisfaction and store choice after a stockout is amended and the product is available again. We argue that while all consumers experience source negativity in response to a stockout, only high reactance consumers experience product desirability; high reactance consumers (e.g. young males) respond strongly with product desirability when their freedoms are restricted (that is, when they are told they cannot have something they want it even more), while low reactance consumers do not. These different product desirability responses to the initial stockout lead to different responses from consumers when stockouts are amended. We find that quickly restoring unavailable products after a stockout leads high reactance consumers to be more satisfied with the offending store and the formerly unavailable product, and more likely to return to a store, compared to a control condition where there is no initial stockout. In contrast, low reactance consumers show the opposite effects. This occurs due to different levels of experienced product desirability between high and low reactance consumers. In short, high reactance individuals' responses to stockout amendments are positive due to the product desirability instantiated by the initial restriction; the increased attractiveness of the formerly unavailable product allows high reactance individuals to forgive and reward the store for the initial stockout. Low reactance individuals' responses to stockout amendments are negative due to the lack of product desirability instantiated by the initial restriction; their responses are driven solely by source negativity.
Not Just Fairness: Understanding Consumers' Intentions to Buy Fairtrade Products
John Pracejus, Associate Professor of Marketing, University of Alberta
Monica Popa, University of Alberta
This research examines whether fairness / equity concerns motivate consumers to pay a premium for FairTrade products in a retail setting. Equity Theory assumes that consumers are interested in fairness, and predicts a higher likelihood to pay the FairTrade premium when the product is utilitarian (versus hedonic). The affect-based-complementarity hypothesis advances the opposite prediction using guilt as a primary motivator for FairTrade purchases. Two experiments show that the impact of product class on likelihood to purchase fair-trade is (1) moderated by consumer social value orientation and (2) can be enhanced through priming equity.
Stuck in a rut: Examining patterns of repetition, variety seeking and choice in a utility maximizing framework
Joffre Swait, Professor of Marketing, University of Alberta
W.L. (Vic) Adamowicz, Professor, Dept of Rural Economy, University of Alberta
Given the large number of choices that consumers make each day it seems likely that they will generally adopt decision strategies that minimize cognetive effort. One such strategy may be to simply chhose what has been chosen in the past, i.e. falling into a pattern of routine choices or decisions. We develop a conceptual and empirical model of routine choice and the factors that result in transitions to strategies other than routine selection, including full evaluation of the alternatives available and a variety seeking strategy. The empirical approach we employ provides a mechanism for the examination of panel data that avoids th state dependence issues present in most applications to these types of data. We apply this framework to the choice of two food products that illustrate that heterogeneity across types of products in decision strategies and routine choice patterns.
2008-2009 Seed Grant Research
Optimal Reverse- Pricing Mechanisms
Gerald Haubl,Associate Professor & Canada Research Chair, University of Alberta
Martin Spann, Munich School of Management, Ludwig-Maximilians University Munich
Robert Zeithammer, Anderson School of Management, University of California Los Angeles
Reverse pricing is a market mechanism under which a consumer’s bid for a product leads to a sale if the bid exceeds a hidden acceptance threshold the seller has set in advance. The seller faces two key decisions in designing such a mechanism. First, he must decide where in the process to collect the revenue—that is, whether to commit to a minimum markup above cost (and thus define the bid-acceptance threshold given cost) and whether to set a fee for the consumer’s right to bid. Second, the seller must decide whether to facilitate or hinder consumer learning about the current bid-acceptance threshold. We analyze these decisions for a profit maximizing small intermediary retailer selling to consumers who can also purchase the product in an outside posted-price market. The optimal revenue model is to charge a fee for the right to bid and then accept all bids above cost, rather than to set a positive minimum markup above cost. Avoiding minimum markups in favor of a bidding fee is more profitable because of increased efficiency arising from more entry by consumers and higher bids by the entrants. When consumers learn about the bid-acceptance threshold before they enter the market, efficiency increases further, and generating revenue through a bidding fee can compensate the seller for his loss of information rent when the competition from the outside posted-price firm is relatively weak.
Bid-Elicitation Interfaces and Bidding Behavior in Retail Interactive Pricing
Gerald Häubl, Associate Professor & Canada Research Chair, University of Alberta
Advances in information technology have led to a substantial increase in the use of interactive pricing mechanisms, where buyers and sellers enter a formal computer-mediated price-negotiation process during which prospective buyers submit bids. This article examines how the interface used for bid elicitation affects bidding behavior and, ultimately, seller profit. Our focus is on one key aspect of the bid-elicitation interface—how sellers require bidders articulate their bids. Evidence from four experiments involving economically consequential bids demonstrates that the candidate bid amounts specified by the seller have a strong influence on bidding behavior, and consequently also on seller profit. In particular, the level of candidate bid amounts has a positive effect on actual bid amounts, whereas it has a negative impact on the likelihood that a prospective buyer will actually submit a bid. Critically, we show that the former effect can more than offset the latter to cause an increase in seller profit. We propose and find support for two distinct psychological mechanisms as the forces underlying this phenomenon—the level of candidate bid amounts (1) influences bidders’ valuations of the offered product and (2) shapes bidders’ beliefs about what bid amounts will be successful. Our results highlight the importance of the design of user interfaces for interactive pricing, demonstrating that even seemingly innocuous aspects of interfaces can have a dramatic impact on bidding behavior and seller profit.
Searching in Choice Mode: How Personalized Recommendations Transform Consumer Decision Setting the MSRP
Yuanfang Lin, Assistant Professor of Marketing, University of Alberta
This research project is studying manufacturer suggested retail price (MSRP). Recent work in this area has found that both retailers and their customers generally expect the actual retail prices to be below MSRP levels. Dr. Lin’s research examines the feasibility, as well as potential problems and benefits, to different parties involved in retail marketing if MSRP is implemented with rigidity – i.e., treated as Maximum Selling Retail Price. The research findings are expected to provide managerial recommendations to the retail industry when it comes to the negotiation with upstream manufacturers regarding price setting authority and flexibility in competitive markets.
The Impact of Gasoline Prices on Shopping Decisions
Yu Ma, Assistant Professor of Marketing, University of Alberta
This research project explores the impact of gasoline prices on shopping decisions such as shopping frequency, budget allocation across competing retail formats (grocery stores, drug stores, mass merchandisers, and warehouse clubs), shifting of shopping budgets across staples and non-staple categories, and choice of national brands versus private labels. The results shed light on the nature of retail format competition in today’s fast changing environment.
The Future of the Market Research Profession
Paul Messinger, Associate Professor of Marketing, University of Alberta
Xin Ge
Like many fields, the profession of market research is being transformed by technology. The Internet has been a great enabler of market research by making distant multifaceted communications more efficient. Virtualization technologies of synthetic worlds are further changing market research methods by making online communications more personal and vivid. We begin this chapter with a vision of the market research profession in 2025, dramatized as a day in the life of a marketing research professional. We then trace how five market research methods were first influenced by the Internet and are likely to be further influenced by virtualization technologies. Finally, we describe prospective future developments assumed in our dramatization, as well as likely research directions.
Visual Self-Representation in Avatar-Mediated Environments
Paul R. Messinger, Associate Professor of Marketing, University of Alberta
Xin Ge, Eleni Stroulia, Kelly Lyons, Kristen Smirnov
An important form of user-created content involves people’s online representations of themselves. In this paper, we examine the relationship between avatars in virtual worlds and the people they represent in terms of their appearance and behavior. To make the best use of these worlds for business, educational or social contexts, consumer and industry practitioners need to be able to suitably interpret the appearance of the avatars that are encountered. Practitioners also need to understand how these self-representations can influence user behavior. We hypothesize that people (balancing motives of self-verification and self-enhancement) design the image of their avatars to bear similarity to their real selves, but with moderate enhancements. In particular, users will enhance most on those physical attributes that they perceive to be weak in real life. We examine two forms of data: (a) a study that compares coders evaluations of avatar images in Second Life with photographs of the real people the avatars represent and (b) an in-world intercept survey of residents of Second Life. Both forms of data indicate that people strike a balance between retaining elements of their real appearance and making enhancements. And people retain their most attractive real features, but enhance on their less attractive features, including weight, clothing style, age, and body shape.
Virtual worlds — past, present, and future: New directions in social computing
Paul Messinger, Associate Professor of Marketing, University of Alberta
Eleni Stroulia, Kelly Lyons, Michael Bone, Run H. Niu, Kristen Smirnov, Stephen Perelgut
An important form of user-created content involves people’s online representations of themselves. In this paper, we examine the relationship between avatars in virtual worlds and the people they represent in terms of their appearance and behavior. To make the best use of these worlds for business, educational or social contexts, consumer and industry practitioners need to be able to suitably interpret the appearance of the avatars that are encountered. Practitioners also need to understand how these self-representations can influence user behavior. We hypothesize that people (balancing motives of self-verification and self-enhancement) design the image of their avatars to bear similarity to their real selves, but with moderate enhancements. In particular, users will enhance most on those physical attributes that they perceive to be weak in real life. We examine two forms of data: (a) a study that compares coders evaluations of avatar images in Second Life with photographs of the real people the avatars represent and (b) an in-world intercept survey of residents of Second Life. Both forms of data indicate that people strike a balance between retaining elements of their real appearance and making enhancements. And people retain their most attractive real features, but enhance on their less attractive features, including weight, clothing style, age, and body shape.
Consumer Product Warranties: Moral Hazard, Branding and Quality
Barry Scholnick, Eric Geddes Associate Professor of Business, University of Alberta
The issue of product quality is central to much of the retailing literature, but quality is very hard to measure. Our research makes use of a very large database of warranties purchased for durable consumer goods such as fridges, dishwashers etc. This data provides a new measure of quality: the number and costs of warranty claims made for each product, as a proportion of warranties sold. With this data we can examine the impact that quality has on future brand loyalty over product over time. If a product has a low level of quality (i.e. high warranty claims) does this impact the performance of that brand in the future?