IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Smart Agents: When Lower Search Costs for Quality Information Increase Price Sensitivity

Listed author(s):
  • Diehl, Kristin
  • Kornish, Laura J
  • Lynch, John G, Jr
Registered author(s):

    Recent consumer research suggests that lowering search costs for quality information reduces consumer price sensitivity by creating greater perceived differentiation among brands (e.g., Kaul and Wittink 1995; Lynch and Ariely 2000). We argue that lowering quality search costs by smart agents can have the opposite effect on differentiation and price sensitivity. Smart agents screen through a universe of alternatives, recommending only a handful well-matched to the customer's quality preferences. In this research, we ask and answer the following questions: In markets in which price and quality are uncorrelated, will the use of screening agents increase or decrease prices paid compared to searching from an unordered list of options? Will increasing the size of the store's underlying assortment increase or decrease prices paid when options have been screened on quality? In markets where higher priced goods have higher quality, will the use of screening agents increase or decrease prices paid and quality selected? Experiments 1 and 2 test the effect of quality screening when price and quality are uncorrelated. We then present an analytic model for markets in which price and quality are correlated. We deduce that ordering can cause price and quality to increase or decrease depending on the slope of the price-quality relationship in comparison with the relative importance of price in the utility function. We find support for this model in experiment 3. Copyright 2003 by the University of Chicago.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://dx.doi.org/10.1086/374698
    Download Restriction: no

    Article provided by Oxford University Press in its journal Journal of Consumer Research.

    Volume (Year): 30 (2003)
    Issue (Month): 1 (June)
    Pages: 56-71

    as
    in new window

    Handle: RePEc:oup:jconrs:v:30:y:2003:i:1:p:56-71
    Contact details of provider:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:oup:jconrs:v:30:y:2003:i:1:p:56-71. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.