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Transaction utility and quality choice

Title
Transaction utility and quality choice
Authors
Sajeesh S.Song S.-Y.
Ewha Authors
송상영
Issue Date
2017
Journal Title
Review of Marketing Science
ISSN
1546-5616JCR Link
Citation
vol. 15, no. 1, pp. 1 - 17
Keywords
product positioningreference pricestransaction utility
Publisher
Walter de Gruyter GmbH
Indexed
SCOPUS scopus
Abstract
This paper uses a game-Theoretic model to examine the role of reference price for firms that vary in their quality positioning in competing for customers. Reference prices provide consumers with additional components of utility. Building on previous research on the impact of consumer decision making on firm strategies, we focus on how firms choose their positioning when consumer utility is driven not only by acquisition utility but also by the transaction utility associated with the purchase and how this, in turn, affects firms' pricing decisions and profits. Considering a competition between two firms, this paper shows that the firm with higher product quality provides greater discounts to consumers. We also show that when firms are allowed to set a high 'regular' price, product differentiation is greater between the firms, and price competition is less intense. Furthermore, under some conditions, the profits of both firms can be higher than the benchmark case (when the effects of transaction utility are ignored). © 2017 Walter de Gruyter GmbH, Berlin/Boston 2017.
DOI
10.1515/roms-2016-0030
Appears in Collections:
경영대학 > 경영학전공 > Journal papers
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