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http://hdl.handle.net/10397/89825
Title: | Consumer entry : impact on expert’s pricing and overcharging behavior | Authors: | Qiu, Q Jiang, L |
Issue Date: | Apr-2021 | Source: | Journal of systems science and systems engineering, Apr. 2021, v. 30, p. 236-250 | Abstract: | In a credence goods market, a consumer (he) is unaware of his true need, which can be either intense or minor. An expert (she) designs a menu that either charges a uniform price to both services, termed pooling pricing, or varies charges according to service types, termed differential pricing. Learning the menu offered by the expert and anticipating her behavior in serving consumers, a consumer weighs the expected utility of service provision against the cost incurred in transportation to decide whether to visit the expert, termed entry decision. Upon arrival of a consumer, the expert discerns his true need and recommends a service along with the associated charge. Under the liability assumption, the expert provides a service to satisfy the consumer’s need. However, the consumer is unable to discern the nature of the service actually provided. This can induce the expert who adopts differential pricing to recommend intense service to a consumer with minor need, termed overcharging. We investigate the effects of consumers’ entry decision on the expert’s optimal pricing strategy and the occurrence of overcharging, and study the robustness of the main results to practical features. | Keywords: | Competition Consumer entry Credence goods Overcharging Pricing |
Publisher: | Springer | Journal: | Journal of systems science and systems engineering | ISSN: | 1004-3756 | EISSN: | 1861-9576 | DOI: | 10.1007/s11518-021-5486-4 | Rights: | Posted with permission of the publisher. © Systems Engineering Society of China and Springer-Verlag GmbH Germany 2021 This version of the article has been accepted for publication, after peer review (when applicable) and is subject to Springer Nature’s AM terms of use (https://www.springernature.com/gp/open-research/policies/accepted-manuscript-terms), but is not the Version of Record and does not reflect post-acceptance improvements, or any corrections. The Version of Record is available online at: http://dx.doi.org/10.1007/s11518-021-5486-4. |
Appears in Collections: | Journal/Magazine Article |
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Qiu_Consumer_Entry_Impact.pdf | Pre-Published version | 1.47 MB | Adobe PDF | View/Open |
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