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Managing Service Expectations in Online Markets: A Signaling Theory of E-tailer Pricing and Empirical Tests

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  • Mitra, Debanjan
  • Fay, Scott

Abstract

Expectations play a significant role in determining customer perceptions and satisfaction. Accordingly, retailers seek to manage customers’ service expectations. However, the tangible signals of service quality that are available to brick-and-mortar retailers (such as location, store appearance, and salespersons’ behavior) may not be available in online markets. Using a signaling model, we obtain conditions when Internet retailers (e-tailers) use price to manage their customers’service expectations. In contrast to extant theory, we find that it is possible for both low and high service e-tailers to use price in signaling their service levels. Further, we develop an appropriate deductive test of our theory based on price-ending patterns as an artifact of the signaling process. Based on this test, we find evidence that e-tailers indeed manage service expectations using price. Interestingly, we also find preliminary evidence that suggests customers implicitly associate price-ending patterns with a retailer's expected service level. We discuss several other implications of our findings for researchers and managers.

Suggested Citation

  • Mitra, Debanjan & Fay, Scott, 2010. "Managing Service Expectations in Online Markets: A Signaling Theory of E-tailer Pricing and Empirical Tests," Journal of Retailing, Elsevier, vol. 86(2), pages 184-199.
  • Handle: RePEc:eee:jouret:v:86:y:2010:i:2:p:184-199
    DOI: 10.1016/j.jretai.2010.02.003
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:joreco:v:21:y:2014:i:1:p:69-76 is not listed on IDEAS
    2. Hongyi Sun & Wenbin Ni & Zhiqiang Wang, 2016. "A consumption system model integrating quality, satisfaction and behavioral intentions in online shopping," Information Technology and Management, Springer, vol. 17(2), pages 165-177, June.
    3. repec:eee:jouret:v:87:y:2011:i:4:p:462-478 is not listed on IDEAS
    4. Ya-Hui Wang, 2017. "Expectation, Service Quality, Satisfaction, and Behavioral Intention – Evidence from Taiwan’s Medical Tourism Industry," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 7(1), pages 1-1.
    5. Mohamed Akli Achabou, 2014. "Brand influence on consumer preference for environmental labels," Working Papers 2014-139, Department of Research, Ipag Business School.
    6. Jiang, Guoyin & Tadikamalla, Pandu R. & Shang, Jennifer & Zhao, Ling, 2016. "Impacts of knowledge on online brand success: an agent-based model for online market share enhancement," European Journal of Operational Research, Elsevier, vol. 248(3), pages 1093-1103.
    7. repec:eee:jouret:v:91:y:2015:i:1:p:125-139 is not listed on IDEAS

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