Marketing Science
Reward Programs and Tacit Collusion
Marketing Science
Third-Party Product Review and Firm Marketing Strategy
Marketing Science
Using Online Conversations to Study Word-of-Mouth Communication
Marketing Science
Marketing Science
Information Sharing in a Channel with Partially Informed Retailers
Marketing Science
Firm Strategies in the “Mid Tail” of Platform-Based Retailing
Marketing Science
How Does the Variance of Product Ratings Matter?
Management Science
Online Product Opinions: Incidence, Evaluation, and Evolution
Marketing Science
Advertising and Consumers' Communications
Marketing Science
Add-on Pricing by Asymmetric Firms
Management Science
| Hi-index | 0.00 |
This paper explores whether and how a firm should adapt its strategy in view of consumer use of prior customer ratings. Specifically, we consider optimal pricing and whether the firm should offer an unexpected frill to early customers to enhance their product experiences. We show that if price history is unobserved by consumers, a forward-looking firm should always modify its strategy from single-period optimal one, but it may be optimal to do so by lowering price, by lowering price and offering frills, or by raising price and offering frills, depending on the market growth rate. Specifically, the last strategy becomes optimal when market growth rate is high enough. The results are similar when the price history is observed by consumers, except that no deviation from single-period profit maximization choices is optimal when market growth is low enough. We also analyze whether the firm should prefer that the price information be stated in or left out of consumer reviews. In addition, in considering the effects of consumer heterogeneity, we conclude that the optimal firm's effort to affect ratings is higher when the idiosyncratic part of consumer uncertainty is larger.