The Impact of Online Information on the Value of Quality Signals in Traditional Markets

34 Pages Posted: 26 Feb 2007 Last revised: 3 Aug 2014

See all articles by Vandana Ramachandran

Vandana Ramachandran

University of Utah - Department of Operations and Information Systems

Siva Viswanathan

University of Maryland - Robert H. Smith School of Business

Sanjay Gosain

University of Maryland - Robert H. Smith School of Business

Date Written: April 2008

Abstract

With the decentralization of information and the democratization of expertise brought about by the growth of the Web, consumers now have access to a plethora of information on various aspects of their purchase process. This study seeks to examine whether such decentralized online information substitutes or complements traditional centralized sources of information. Specifically, we examine how the increased access to online information alters the salience and value of conventional quality signaling mechanisms such as certification for consumers. We draw upon a unique and extensive dataset of consumers who obtained vehicle and transaction related information from online sources in their used vehicle purchase process to examine the impact of their information acquisition on the choice of certification, as well as the price paid. We compare the outcomes of sales across certified and non-certified used car purchases. Our findings highlight that product-related information substitutes, and price-related information complements, certification as indicated by their differential impacts on demand and price of certified used cars. We discuss the relevance of our findings for buyers and sellers and outline implications for online information providers as well.

Keywords: certification, online information, quality signals, uncertainty reduction, used cars

JEL Classification: M31, O33, C01, C42

Suggested Citation

Ramachandran, Vandana and Viswanathan, Siva and Gosain, Sanjay, The Impact of Online Information on the Value of Quality Signals in Traditional Markets (April 2008). NET Institute Working Paper Series No. 07-37, Available at SSRN: https://ssrn.com/abstract=965057 or http://dx.doi.org/10.2139/ssrn.965057

Vandana Ramachandran

University of Utah - Department of Operations and Information Systems ( email )

1645 E Campus Center Drive
University of Utah
Salt Lake City, UT 84112
United States

Siva Viswanathan (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Sanjay Gosain

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

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