The role of consumer behavior and power structures in coping with shoddy goods

This paper aims to understand the increasingly prevalent phenomenon of shoddy goods and help honest firms better cope with the unfair competition posed by shoddy goods producers. The authors develop a game-theoretic model to examine the interaction between an honest manufacturer of quality goods (the truth-teller) and an unscrupulous producer of shoddy goods (the deceiver). Three power structures are considered: with the truth-teller as leader, with the deceiver as leader, and with equal-power players. Their equilibrium analysis suggests that when consumers make only one-time purchase, the truth-teller is prone to suffer profit loss. Yet some power structures may help the truth-teller mitigate the risk of losing profit. Specifically, when the announced quality of the deceiver is low enough, the truth-teller-as-leader power structure reduces the truth-teller’s risk of profit loss; in contrast, when the announced quality of the deceiver is not low enough, the deceiver-as-leader power structure has a better mitigating effect; and the equal-power-player power structure always works worst. The authors also investigate the role of consumer repurchase behavior in fighting shoddy goods by extending the model to incorporate consumer dissatisfaction and repurchase frequency. A numerical study indicates that consumers’ quality expectation disconfirmation sensitivity can deter the deceiver from exaggerating its product quality – either when consumers’ repurchase frequency is high or when consumers repurchase at a medium frequency in a market led by the truth-teller. Their findings yield new theoretical insights for firms and industries seeking to combat shoddy goods.

• Record URL:
  https://doi.org/10.1016/j.tre.2021.102482
• Record URL:
  http://www.sciencedirect.com/science/article/pii/S1366554521002441
• Availability:
  • Find a library where document is available. Order URL: http://worldcat.org/issn/13665545
• Supplemental Notes:
  • © 2021 Elsevier Ltd. All rights reserved. Abstract reprinted with permission of Elsevier.
• Authors:
  • Hu, Shu
  • 0000-0002-4737-4291
  • Fu, Ke
  • Wu, Tong
  • 0000-0003-2535-1467
• Publication Date: 2021-11

Language

• English

Media Info

• Media Type: Web
• Features: References; Tables;
• Serial:
  • Transportation Research Part E: Logistics and Transportation Review
  • Volume: 155
  • Issue Number: 0
  • Publisher: Elsevier
  • ISSN: 1366-5545
  • Serial URL: http://www.sciencedirect.com/science/journal/13665545

Subject/Index Terms

• TRT Terms: Competition; Consumer behavior; Products; Retail trade
• Subject Areas: Economics; Transportation (General);

Filing Info

• Accession Number: 01785179
• Record Type: Publication
• Files: TRIS
• Created Date: Oct 22 2021 9:02AM