Valuation Of Products Research Articles

Dual pricing with purchase hassle

Previous research indicates that hassle cost reduces consumers' utility and hurts sellers' profits. However, counterintuitively, some sellers, particularly those who sell online, purposefully increase the hassle cost of purchasing their products. Our work examines how sellers effectively apply dual pricing with purchase hassle to increase their profit and how it affects consumers' purchasing decisions and utility. Different from previous studies, we take into account both the heterogeneities of consumers' product valuations and hassle costs. We find that when consumers' hassle costs are independent of their product valuations, decrease or concavely increase in the product valuations, dual pricing with purchase hassle reduces sellers' profits. When consumers' hassle costs are convex increasing in their product valuations and the relative increasing rate is high, sellers can obtain additional profit through dual pricing. Moreover, under dual pricing, consumers' utility is non-monotonic in their product valuations. Finally, we extend our model to the case where the former full price is kept while switching to dual pricing, the case with network effects, the case where the cost to sellers of offering dual pricing is higher than single pricing, as well as the implications on consumer surplus. In these cases, our findings remain applicable.

Navigating design and innovation hegemonies in Chilean crafts

Amidst the industrial decline in South America in the 1980s, and the failure of economic development projects, perspectives have shifted from industrialisation towards a focus on human development ‘by design’ and the empowerment of craftsmanship. In Chile, interactions between design and craft have increased significantly since the 1990s due to new national and international cultural policies. Efforts have been made to safeguard tradition or induce innovation through professional design to promote craft products and mediate between local and global values. This study examines the tensions in design-craft interactions, unpacking the hegemonic and paternalistic design approaches that often overshadow artisans’ innovations. Using historical and ethnographic analysis, this study focuses on Pomaire, a village renowned for its pottery tradition and cultural significance that has faced criticism from the Chilean cultural establishment for a perceived loss of tradition, with institutions favouring specific cultural expressions and modern design over artisans’ strategies. This research highlights the frictions between design and crafts in pursuing innovation and development, showing how institutional frameworks influence the recognition, valuation and commercialisation of artisanal production. It also contributes to our understanding of the power dynamics between designers and artisans, emphasising artisans’ agency in shaping their traditions amidst socioeconomic changes.

To disclose or to conceal? Comparison of different disclosure policies in queues with loss-averse customers

In many service industries, information disclosure about the product can alleviate customers’ loss aversion induced by uncertain product valuation. In this paper, we consider a single-server queueing system in which the manager who privately learns the valuation information discloses the valuation information strategically to loss-averse customers. We investigate the impact of the customers’ loss aversion on the system’s equilibrium arrival rate and the manager’s optimal disclosure policy. We find that loss aversion restrains customers from joining the queue. Surprisingly, we find that there is no one disclosure policy that always prevails over other disclosure policies. Specifically, the full disclosure policy is optimal only when the valuation is large and the degree of loss aversion is moderate. The full non-disclosure policy is optimal when the degree of loss aversion is too large or too small, or the valuation is small. The threshold disclosure policy is optimal when the valuation and the degree of loss aversion are moderate. Furthermore, under the threshold disclosure policy, the increasing degree of loss aversion makes managers be more reluctant to disclose the valuation.

Online retailing with key opinion leaders and product returns

Key opinion leaders (KOLs) play a crucial role in marketing because of their potential fan market and influence. We analytically study whether a seller should cooperate with a key opinion leader (KOL) by considering the KOL's two effects: first, the KOL's existence will increase the number of consumers who are aware of the product; second, a more positive (negative) product review from the KOL will increase (decrease) consumers' prepurchase belief in product valuation. After buying the product, consumers will realize their actual product valuation, based on which they decide to return or keep the product. We find that when the product valuation posted in the KOL's product review is exogenous, a more positive review from the KOL benefits the seller but can harm the KOL. As the consumer's hassle cost of product return increases, both the seller and the KOL can be better off. If the positivity of the KOL's product review is high, the KOL's existence will benefit the seller and harm the consumers. Moreover, if the KOL can strategically make the marketing effort to increase their popularity, their marketing effort will decrease as their product review becomes more positive. If the KOL can strategically choose how they present the product, i.e., when the product valuation posted in the KOL's product review is endogenous, their product review will be less positive than the product review that maximizes the system's profit, i.e., the total profit of the KOL and the seller. The model extension shows that the result is robust.

On the valuation of legacy power production in liberalized markets via option-pricing

Legacy assets can constitute entry barriers in liberalized power markets. Regulations pertaining to such assets have many objectives, the most important of which are to transfer the benefits of an economical production technology to consumers and foster competition. To that end, countries have adopted various regulations but there is no consensus today on identifying the first best solution. Inspired by the French regulation of historical nuclear production and considering the market risk that now prevails in the sector, we propose an option-based approach to regulating legacy assets that reflects production costs and encompasses optionality at the same time. To achieve that aim, we study a competitive, but financially incomplete market where the incumbent and several competitors exchange legacy production via a regulated call option. Agents do not face the same risk exposure and their attitudes toward risk, which we model by coherent risk measures, might differ. The result is a stochastic equilibrium model of regulated option-pricing in incomplete markets that we calibrate numerically and solve for the French market. We quantify the option value and assess its impact on the system for various regimes of the spot market, including the one of very high and volatile prices of the recent energy crisis. We also analyze the impacts of risk aversion and the option’s maturity. Based on our analysis, we provide recommendations for enhancing the current French regulation of historical nuclear production.

Local–Global Cobrand Positioning and Consumer Evaluations in Emerging Markets

Cobranding initiatives between a local and a global brand have become a prominent practice. This research contributes to the cobranding and global branding literatures by investigating the effects of positioning strategy of the cobranded product (global consumer culture positioning vs. local consumer culture positioning) on consumer evaluations in emerging markets. In five experiments, the authors show that using global consumer culture positioning for the cobranded product leads to heightened word-of-mouth intentions and more favorable product valuations. This effect holds for both local and global product categories. Building on signaling theory, the authors show that brand credibility mediates the effect of positioning strategy on word-of-mouth intentions. Further, when the local (vs. global) brand is the announcement source, using a global rather than a local consumer culture positioning leads to enhanced word-of-mouth intentions. Yet, for consumers with stronger ethnocentrism, when the global brand makes the announcement of a cobranded product positioned on local consumer culture, word-of-mouth intentions are higher. Altogether, the findings have nuanced implications for local branding, global branding, and young consumers in emerging markets.

Selling mode choice and return policy for advance selling in an e-commerce platform with social influence

Advance selling is increasingly employed to mitigate demand uncertainty, raise consumer awareness of products, and even exert social influence on subsequent sales. However, consumers may hesitate to pre-order products due to uncertainty about product valuation. As a response, sellers have begun implementing return policies and utilizing online retail platforms to alleviate the uncertainty. This study aims to investigate the interaction between return policies for advance selling and selling formats of e-commerce platforms considering the impact of social influence. We examine a two-period platform supply chain that includes agency selling, reselling, and hybrid selling formats with and without return policies. Using game theory models, we analyze pricing decisions and profits of each player under six possible scenarios. The results indicate that the manufacturer consistently prefers adopting a Money-Back Guarantee (MBG) return policy regardless of the selling format. However, the MBG return policy is not always advantageous for the platform, except in the case of low social influence. In such a case, the platform may implement the MBG return policy to boost advance sales, thereby enhancing the penetration power from advance sales to regular sales. Regarding selling formats, the platform and the manufacturer opt for the reselling and agency selling, respectively, when the commission rate is low; otherwise, they adopt the agency selling and hybrid selling, respectively. Furthermore, we explore the impact of critical drivers on the pricing decisions and profits within the platform supply chain. Our study offers valuable insights into implementing return policies and determining selling formats.

Intraconsumer Price Discrimination with Credit Refund Policies

Consumers often receive a full or partial refund for product returns or service cancellations. Much of the existing literature studies cash refunds, where consumers get the money back minus a fee upon a product return or service cancellation. However, not all refunds are issued in cash. Sometimes consumers receive credit that can be used for future purchases, oftentimes with an expiration term after which the credit is forfeited. We study the optimal design of credit refund policies. Different from models that consider cash refunds, we explicitly model repeated interactions between the seller and consumers over time. We assume that consumers’ valuation for the product/service varies over time and that there is an exogenous probability for product returns. Several interesting results emerge. First, a credit refund policy facilitates intraconsumer price discrimination for a single type of consumers with stochastic valuation. Second, an optimal policy often involves an intermediate credit expiration term, under which a consumer with a high product valuation always makes a purchase, whereas a consumer with a low product valuation may be induced to make a purchase as the credit approaches expiration, leading to a demand induction effect. Finally, a credit refund policy can be more profitable than a cash refund policy and can lead to a win-win outcome for both the firm and consumers under certain conditions. We also consider several extensions to check the robustness of our findings. This paper was accepted by Jeannette Song, operations management. Funding: Y. Liu was substantially supported by a grant from the Research Grants Council of the Hong Kong Special Administrative Region, China (Project No. PolyU15502420). Y. Liu was also supported by a grant from NSFC [72293564/72293560]. Supplemental Material: The data and online appendices are available at https://doi.org/10.1287/mnsc.2020.03042 .

Chemical Markers in Italian Propolis: Chrysin, Galangin and CAPE as Indicators of Geographic Origin

Knowledge of the chemical composition of propolis is crucial for understanding the characteristics of products of different origins, but also for quality control and regulatory purposes. To date, official monographs or official analyses that allow researchers to evaluate propolis in a proper way have not yet been released. This study focuses on the characterization of twenty-seven Italian propolis samples and the identification of chemical markers that define its geographical provenance. Total polyphenol (TP) and total flavonoid (TF) content, alongside the quantification of pinocembrin, chrysin, galangin, and caffeic acid phenethyl ester (CAPE), were identified as potential markers. Additionally, DPPH assays were conducted to evaluate the antiradical activity of propolis samples. Our findings demonstrated that TPs, TFs and pinocembrin differed in propolis of different origins, especially in samples from the islands. However, the quantification of the sum of chrysin and galangin and CAPE provided a clearer distinction of the geographical origin of the propolis samples. In contrast, the DPPH assay did not prove useful for this purpose, as most results were similar and, therefore, not significant. This study lays the groundwork for future research on propolis. These findings could contribute to the development of more refined methods for distinguishing propolis origins, enhancing the understanding, valuation and quality control of this natural product in various applications.

When and how it is good for fashion to look typical: visual prototypicality affecting product valuation and brand preference

PurposeAlthough visual prototypicality in fashion is an observed phenomenon, empirical examinations of the link between fashion products' design prototypicality and consumer evaluations still need to be included. The present study analyzes the influence of the visual prototypicality of fashion products on consumer-perceived product values and brand preference.Design/methodology/approachAn online survey adopting the fashion product images with significantly differing levels of visual prototypicality was used to collect data from 456 US consumers. The hypothesized relationships among visual prototypicality, product values and brand preference were analyzed through multi-group analysis.FindingsPerceived visual typicality of fashion product designs significantly increased the hedonic and utilitarian value of the product and only indirectly increase brand preference. The hypothesized positive relationship between visual prototypicality and the product’s social value was found to be significant only in the low-price levels but became insignificant in the high-price levels.Originality/valueThe findings of this study contribute to the extant literature by first providing an initial analysis of the mechanism of visual prototypicality in the fashion product design field. The results confirm that visual prototypicality indirectly influences consumers' brand evaluations by the product’s perceived value. This relationship was previously assumed but not empirically proven only in non-fashion product categories. The study also presents additional new points, further enriching the understanding of visual typicality. Additionally, the results show the complex relationship between the visual prototypicality of fashion product designs and the perceived social value of the product, which varies depending on the price range.

Impact of correlation between interest rates and mortality rates on the valuation of various life insurance products

AbstractIn this paper, we question the traditional independence assumption between mortality risk and financial risk and model the correlation between these two risks, estimating its impact on the price of different life insurance products. The interest rate and the mortality intensity are modelled as two correlated Hull and White models in an affine set-up. We introduce two building blocks, namely the zero-coupon survival bond and the mortality density, calculate them in closed form and perform an investigation about their dependence on the correlation between mortality and financial risk, both with theoretical results and numerical analysis. We study the impact of correlation also for more structured insurance products, such as pure endowment, annuity, term insurance, whole life insurance and mixed endowment. We show that in some cases, the inclusion of correlation can lead to a severe underestimation or overestimation of the best estimate. Finally, we illustrate that the results obtained using a traditional affine diffusive set-up can be generalised to affine jump diffusion by computing the price of the zero-coupon survival bond in the presence of jumps.

Cancel the Deal? An Experimental Study on the Exploitation of Irrational Consumers

Consumers can sometimes be exploited because they make mistakes in their valuation of products. We present the results from a large-scale experimental study that examines whether third-party spectators from the general population in the United States cancel a voluntary deal where a buyer has made a mistake in the valuation of a product and agreed to pay more for the product than the seller knows it is worth. We find that the majority of the spectators cancel such deals, even when the seller’s involvement is limited to accepting a proposal made by the buyer. A substantial share of these spectators is also willing to fine the seller. However, a large minority of the spectators are willing to uphold the deal even when the seller has proposed the deal and obfuscated the information provided to the buyer. Our results shed new light on when people view market transactions as acceptable and their attitudes to government regulation of businesses. This paper was accepted by Axel Ockenfels, behavioral economics and decision analysis. Funding: This project was financed with support from the Norges Forskningsråd [Centres of Excellence Scheme Centre for Experimental Research on Fairness, Inequality and Rationality Project 262675 Grants 236995, 250415, 262636, and 302145]. The project also received funding from the European Research Council [the European Union’s Horizon 2020 Research and Innovation Programme Grant 788433]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.01050 .

Anatomical Depiction: How Showing a Product's Inner Structure Shapes Product Valuations

Anatomical depiction is a technique whereby the product is decomposed into components that are spatially arranged layer by layer to visually explicate its inner structure. The authors demonstrate that anatomical depiction, compared with nonanatomical depiction, enhances product valuation. This effect occurs because anatomical depiction elicits a “coming together” of the inner components in consumers’ minds, thereby evoking a gestalt image of the product—a process labeled “simulated assemblage.” The elicitation of simulated assemblage in turn boosts confidence in the product's performance. Two field experiments demonstrate that anatomical depiction leads to greater engagement in online settings such as peer-to-peer selling and social media advertising. Subsequently, seven laboratory and online experiments show when and how anatomical depiction elicits simulated assemblage (Studies 1a–c), test the process underlying the effect of anatomical depiction on product valuation (Studies 2a–b), and delineate two boundary conditions, showing that the positive effect of anatomical (vs. nonanatomical) depiction attenuates for consumers higher (vs. lower) in technology anxiety (Study 3) and when consumers have a hedonic (vs. utilitarian) consumption goal (Study 4). Collectively, this work provides insights to firms on how and when to use anatomical depiction to enhance consumers’ confidence in and valuation of the product.

To Hinder or to Facilitate: Retailers’ Strategy of Consumer Information Sharing

Consumer information sharing is considered an effective strategy to attract consumers, yet certain high-end retailers, such as Bergdorf Goodman and Farfetch, tend to hinder consumers from sharing information through online reviews. We study a retailer’s strategy for consumer information sharing in a supply chain. We find that a retailer’s information sharing strategy can prevent manufacturers from extracting excessive profit when consumers are heterogeneous in their valuations of the selling product. Specifically, a retailer can achieve a higher profit margin by targeting all consumer segments. By strategically choosing the information sharing strategy to influence consumer beliefs, the retailer can induce the manufacturer to conform to the retailer’s preferred targeting segment through a low wholesale price. Thus, a high-end retailer, whose consumers have a high ex-ante quality belief, favors hindering information sharing among consumers because it enables the retailer to target all consumer segments. Interestingly, deterring consumers from learning about the product quality may generate more consumer surplus. Our main results are robust under extensions such as consumer search behavior, consumer waiting, and multiple product selling. When selling multiple products, a retailer with a large quality variation is better off hindering consumers from sharing information. Our work shows that strategically choosing a consumer information sharing strategy enables retailers to enhance profit margins in their interactions with upstream manufacturers.

PENGARUH HARGA, PENILAIAN PRODUK, DAN CASHBACK TERHADAP KEPUTUSAN PEMBELIAN DI MARKETPLACE SHOPEE (Studi Kasus Mahasiswa Universitas Islam Syekh-Yusuf Tangerang)

This study aims to determine the effect of Price (X1), Product Valuation (X2), and Cashback (X3) on purchase decisions (Y) on the shopee marketplace. This research was conducted with quantitative research methods with survey methods, namely research that focuses on testing hypotheses with statistical method analysis too and producing generalizable conclusions. The sample in this study was Sheikh-Yusuf Islamic University students as consumers of the Shopee marketplace totaling 100 people. The sample of respondents in this study used a causal associative approach method with a purposive sampling procedure. While the sampling method of this study uses the Slovin formula. Data analysis techniques with validity tests, reliability tests, classical assumption tests, multiple correlation analysis, simple correlation analysis, multiple linear regression analysis, and hypothesis tests. The calculation process uses SPSS 25. The test results show that Price has a positive and significant effect on purchase decisions by 75.9%, Product Valuation has a positive and significant effect on purchase decisions by 75.1%, and Cashback has a positive and significant effect on purchase decisions by 67.2% in the marketplace Shopee. And price, product valuation, and cashback together have a positive and significant effect on purchasing decisions by 83.6%. A factor that greatly influences purchasing decisions on the shopee marketplace is product assessment

Quality- and productivity-adjusted life years: From QALYs to PALYs and beyond

We develop a unified framework for the measurement and valuation of health and productivity. Within this framework, we characterize evaluation functions allowing for compromises between the classical quality-adjusted life years (QALYs) and its polar productivity-adjusted life years (PALYs). Our framework and characterization results provide a new normative basis for the economic evaluation of health care interventions, as well as occupational health and safety policies, aimed to impact both health and productivity of individuals.

To commit or not? The impact of online reviews on retailers' price commitment strategy in competing supply chains

AbstractOnline reviews can effectively mitigate consumers' uncertainty about product valuations, thus affecting firms' pricing decisions. This paper develops a two‐period game model to investigate the impacts of online reviews on the retailer's price commitment strategies in two competing supply chains, each consisting of one manufacturer and one retailer. In the first period, the retailers strategically set prices and decide whether to commit to prices for their products. In the second period, the retailers adjust product prices in response to online reviews, if they choose not to commit to a price. We show that the retailers' price commitment strategies depend on consumers' perceived uncertainty about product valuations, the information value of online reviews and the unit misfit cost. Interestingly, the retailers can benefit from the information value of online reviews by implementing flexible pricing strategies. Furthermore, if the information value of online reviews is sufficiently high, both retailers will choose not to commit to a price in equilibrium. However, if the information value of online reviews is relatively low, the equilibrium in price commitment is asymmetric, that is, the retailer A commits to a price and its competitor chooses not to commit.

Impact of access regulation on investment reconsidered

In regulated industries like electricity, gas, and telecommunications, regulators often require vertically integrated incumbents to share their infrastructure with competitors in a related market. This paper demonstrates that such access regulation may strengthen an incumbent's incentive to invest in infrastructure even if the regulated access price of an input is set at its marginal cost. Specifically, we reconsider Kotakorpi's (2006) model under an alternative circumstance where downstream rivals would be foreclosed from the market without regulation. We find that the access regulation increases investment and improves social welfare under certain conditions. Our main conclusion is robust to an alternative way of modeling consumers' valuation of products. Furthermore, raising the access price above the marginal cost expands the parameters for which the regulation increases investment. Our analysis suggests that access regulation alone does not reduce an incumbent's investment incentive.

Selection of presale models for innovative products considering channel preferences and valuation differences.

To reduce financial pressure and operational risk, and improve match between supply and demand, an increasing number of enterprises are adopting presales to launch new products. In this context, this paper investigates three presale models for innovative products, namely, the no-presale model, the manufacturer presale model and the retailer presale model. A Hotelling model is used to describe the impact of channel preferences and valuation differences on the two-stage competition between innovative products. Aiming at evaluating the purchase behavior of consumers under three presale modes, a game optimization model is established to analyze the presale decision problem for innovative products under different presale entities. The research shows that: (1) Compared with no-presale, presales can help enterprises obtain more profits. The overall profit of the supply chain is optimal under the retailer presale mode. (2) When the difference in channel preferences is small, the manufacturer obtains the greatest profit by choosing the direct presale model. In contrast, the selection of different presale entities has a significant impact on product sales and supply chain enterprise profits. At this point, the manufacturer should choose the retailer presale model. (3) When the product valuation discount is high, the manufacturer can increase the spot and wholesale prices to induce consumers to choose the presale method to purchase the product. In the opposite situation, the manufacturer should lower the presale price to improve the presale utility of consumers and encourage them to participate in the presale. These conclusions provide more targeted suggestions for enterprises to formulate presale strategies, which can help them grasp market demand and improve market competitiveness.

Advance selling and service cancelation when consumers are overconfident

Purpose This paper aims to study the joint decision making of advance selling and service cancelation for service provides with limited capacity when consumers are overconfident.Design/methodology/approach For the case in which consumers encounter uncertainties about product valuation and consumption states in the advance period and are overconfident about the probability of a good state, we study how the service provider chooses the optimal sales strategy among the non-advance selling strategy, the advance selling and disallowing cancelation strategy, and the advance selling and allowing cancelation strategy. We also discuss how overconfidence influences the service provider’s decision making.Findings The results show that when service capacity is sufficient, the service provider should adopt advance selling and disallow cancelation; when service capacity is insufficient, the service provider should still implement advance selling but allow cancelation; and when service capacity is extremely insufficient, the service provider should offer spot sales. Moreover, overconfidence weakens the necessity to allow cancelation under sufficient service capacity and enhances it under insufficient service capacity but is always advantageous to advance selling.Practical implications The obtained results provide managerial insights for service providers to make advance selling decisions.Originality/value This paper is among the first to explore the effect of consumers’ overconfidence on the joint decision of advance selling and service cancelation under capacity constraints.