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Consumer Risk‐reduction Behavior and New Product Purchases

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  • Koichi Yonezawa
  • Timothy J. Richards

Abstract

Consumers purchase lower quantities of new products compared with those they have purchased in the past. We explain this observation as a result of risk‐averting behavior by utility‐maximizing consumers. If a new product involves a higher degree of risk that quality expectations will not be met compared with an incumbent product, we show that utility will be more concave for the new product. We test this prediction using a multiple‐discrete/continuous extreme value (MDCEV) model of demand. We show that utility is indeed more concave for new products relative to previously purchased products. Copyright © 2017 John Wiley & Sons, Ltd.

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  • Koichi Yonezawa & Timothy J. Richards, 2017. "Consumer Risk‐reduction Behavior and New Product Purchases," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(7), pages 1003-1016, October.
    • Handle: RePEc:wly:mgtdec:v:38:y:2017:i:7:p:1003-1016
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    Cited by:

    1. Bhat, Chandra R., 2018. "A new flexible multiple discrete–continuous extreme value (MDCEV) choice model," Transportation Research Part B: Methodological, Elsevier, vol. 110(C), pages 261-279.

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