To Hinder or to Facilitate: Retailers' Strategy of Consumer Information Sharing and Target Segment

35 Pages Posted: 23 Feb 2021

See all articles by Buqing Ma

Buqing Ma

University of Science and Technology of China

Guang Li

Smith School of Business, Queen's University

Guangwen Kong

Temple University-Fox School of Business

Date Written: February 17, 2021

Abstract

Motivated by the phenomenon that some retailers with high-end brand images, such as Neiman Marcus and Bergdorf Goodman, prefer to hinder consumers from sharing information through online reviews, we study an online retailer's strategy of hindering or facilitating consumer information sharing in a supply chain and its dependence on the retailer's brand image and target consumer segment. To capture the dynamics of consumer information sharing, we employ a two-period model in which consumers, with heterogeneous valuation of a product, arriving in the first period make purchase decisions based on the retailer's brand image and can find out the product quality only after their purchase, and consumers arriving in the second period learn about the product quality from the first-period consumers if the online retailer's website facilitates information sharing among consumers. We find that a high-end retailer is likely to benefit from hindering information sharing among consumers because hindering information enables the high-end retailer to induce all consumers to purchase. Such a target strategy prevents the manufacturer from extracting all of the profit from the retailer, as compared to a target strategy where the retailer only sells to consumers with high levels of willingness to pay. We also show that, interestingly, the retailer's dominant consumer information sharing strategy often benefits the supply chain when the product quality is exogenously determined. However, when the product quality is endogenous, the retailer's dominant consumer information sharing strategy can hurt the supply chain. Surprisingly, deterring consumers from learning about a product's true quality may generate more consumer surplus. Our work sheds light on the retailer's information sharing strategy by taking into account the target consumer segment as well as the interaction with upstream manufacturers.

Keywords: consumer information sharing, supply chain, consumer target segment, online reviews, product quality, pricing

JEL Classification: L11, L15, C72, C73, D21, D82, M31

Suggested Citation

Ma, Buqing and Li, Guang and Kong, Guangwen, To Hinder or to Facilitate: Retailers' Strategy of Consumer Information Sharing and Target Segment (February 17, 2021). Available at SSRN: https://ssrn.com/abstract=3788684 or http://dx.doi.org/10.2139/ssrn.3788684

Buqing Ma

University of Science and Technology of China ( email )

96 Jinzhai Road
Baohe District
Hefei, anhui 23-0036
China

Guang Li

Smith School of Business, Queen's University ( email )

143 Union Street
Kingston, Ontario
Canada

HOME PAGE: http://https://smith.queensu.ca/faculty_and_research/faculty_list/li-guang.php

Guangwen Kong (Contact Author)

Temple University-Fox School of Business ( email )

531 Alter Hall
1801 Liacouras Walk
Philadephia, PA 19122
United States
19122 (Fax)

HOME PAGE: http://https://www.fox.temple.edu/about-fox/directory/guangwen-kong/

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