A Model of Product Design and Information Disclosure Investments

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

A Model of Product Design and Information Disclosure Investments

New technologies such as product simulators and virtual reality now allow firms to provide realistic product usage experiences and reduce buyer uncertainty about product quality. We argue that today’s firms should view product design and investments to reduce buyer uncertainty as an integrated process, which is in turn influenced by how much information buyers can obtain from third-party infomediaries. We introduce a game-theoretic model of a competitive market where both quality production and quality disclosure are endogenous decisions, affected by information made available by third parties. We show that quality investment under uncertainty never exceeds the level of quality investment under perfect information. Furthermore, we show that information availability by third parties allows firms to free ride, and it especially favors lower quality firms, who can reduce their information disclosure investments more so than higher-quality firms. Finally, we show that the intuitive argument that firms must improve their product quality when overall information availability in the market improves does not always hold. Instead, improved information availability may enable firms to reduce their quality in some situations

Dual Pricing in Electronic Markets

We model the availability of information about product attributes in Internet-based markets, focusing on a phenomenon that we term as information deficit (availability of less than perfect information about product attributes) and its impact on the equilibrium strategies of sellers and buyers in electronic markets. We create a model of a market for a differentiated product and investigate how buyer uncertainty regarding the attributes of the product drives market outcomes. We show that a market for product information can partly correct the inefficiencies that arise from imperfect information and predict that product information will begin to be traded once appropriate micro-transaction payment schemes become available. We formulate a mechanism by which sellers can charge an information rent for fine-grained information about product attributes which we term as a dual pricing mechanism wherein sellers extract an information rent in addition to the price of the product from buyers. We analyze the equilibrium that results and comment on the nature of welfare gains. A key finding of the paper is that allowing sellers to charge dual rents leads to more efficient markets

Is Online Product Information Availability Driven by Quality or Differentiation?

We present a game theoretic model for the availability of product information in Internet markets, where buyers can search for multiple products in parallel. We use a multiple-circle variation of Salop’s “unit circle” model of product differentiation where vendors are able to differentiate their products both horizontally (taste) and vertically (quality). We explore the conditions under which vendors make horizontal and vertical product information available to potential customers in equilibrium. We demonstrate that vendors will choose not to provide their full horizontal product information, and will rather leave the buyers with some probabilistic knowledge about their exact horizontal product locations. However, the vendors will release enough horizontal product information for their products to appear distinct from those of competitors. The sellers’ incentives to disseminate vertical product information are shown to be fundamentally different: only the worst possible quality vendors will withhold information on vertical product parameters. Our results suggest an answer for the question that is the title of this paper: Is it the case that online vendors release product information primarily to advertise their product’s superiority or to make clear that their products do not have close competing substitutes? We find that for high quality products the former is more important while the latter gains significance for lower quality products. We present empirical observations of nearly 2,000 products in the PC game industry that provide evidence in favor of the model’s predictions

Completing A Crowdsourcing Task Instead Of An Assignment; What Do University Students Think?

University educators actively seek realistic projects to include in their educational activities. However, finding an actually realistic project is not trivial. The rise of crowdsourcing platforms, in which a variety of tasks are offered in the form of an open call, might be an alternative source to help educators scaleup project-based learning. But how do university students feel about executing crowdsourcing tasks instead of their typical assignments? In a study with 24 industrial design students, we investigate students\u27 attitudes on introducing crowdsourcing tasks as assignments. Based on our study we offer four suggestions to universities that consider integrating crowdsourcing tasks in their educational activities