Asymmetric Consumer Learning and Inventory Competition

Posted: 31 Oct 2008

See all articles by Vishal Gaur

Vishal Gaur

Cornell University - Samuel Curtis Johnson Graduate School of Management

Young-Hoon Park

Cornell University - Samuel Curtis Johnson Graduate School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: February 2005

Abstract

We develop a model of consumer learning and choice behavior in response to uncertain serviceat the marketplace. Learning could be asymmetric, i.e., consumers may associate differentweights with positive and negative experiences. Under this consumer model, we characterize thesteady-state distribution of demand for retailers given that each retailer holds constant in-stockservice level. We then consider a non-cooperative game at the steady-state between two retailerscompeting on the basis of their service levels. Our model yields a unique pure strategy Nashequilibrium. We show that asymmetry in consumer learning has a significant impact on theoptimal service levels, market shares and profits of the retailers. When retailers have differentcosts, it also determines the extent of competitive advantage enjoyed by the lower cost retailer.

Keywords: Asymmetric Consumer Learning, Customer Satisfaction, Inventory Competition, Retail Operations

Suggested Citation

Gaur, Vishal and Park, Young-Hoon, Asymmetric Consumer Learning and Inventory Competition (February 2005). Operations Management Working Papers Series, Vol. , pp. -, 2005. Available at SSRN: https://ssrn.com/abstract=1290210

Vishal Gaur

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

HOME PAGE: http://www.johnson.cornell.edu/faculty/profiles/Gaur/

Young-Hoon Park

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853-6201
United States
(607) 255-3217 (Phone)

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