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Article
Publication date: 20 September 2021

Subimal Chatterjee, Debi P. Mishra, Jennifer JooYeon Lee and Sirajul A. Shibly

Service providers often recommend unnecessary and expensive services to unsuspecting consumers, such as recommending a new part when a simple fix to the old will do, a phenomenon…

Abstract

Purpose

Service providers often recommend unnecessary and expensive services to unsuspecting consumers, such as recommending a new part when a simple fix to the old will do, a phenomenon known as overprovisioning. The purpose of this paper is to examine to what extent consumers tend to defer their decisions should they suspect that sellers are overproviding services to them and they cannot prevent the sellers from doing so (they lack personal control); and how proper market signals can mitigate such suspicions, restore personal control and reduce deferrals.

Design/methodology/approach

The paper conducts three laboratory experiments. The experiments expose the participants to hypothetical repair scenarios and measure to what extent they suspect that sellers might be overproviding services to them and they feel that they lack the personal control to prevent the sellers from doing so. Thereafter, the experiments expose them to two different market signals, one conveying that the seller is providing quality services (a repair warranty; quality signal) and the other conveying that the seller is taking away any incentives their agents (technicians) may have to overprovide services (the technicians are paid a flat salary; quantity signal). The paper examines how these quality/quantity signals are able to reduce overprovisioning suspicions, restore personal control and reduce decision deferrals.

Findings

The paper has two main findings. First, the paper shows a mediation process at work i.e. suspecting potential overprovisioning by sellers leads consumers to defer their decisions indirectly because they feel that they lack personal control to prevent the sellers from doing so. Second, the paper shows that the quantity signal (flat salary disclosure), but not the quality signal (warranty), is able to mitigate suspicions of overprovisioning, restore personal control and reduce decision deferrals.

Practical implications

The paper suggests that although buyers may rely on quality signals to assure them of superior service, these signals do not guarantee that the quantity of service they are receiving is appropriate. Therefore, sellers will have to send a credible quality signal and a credible quantity signal to the consumers if they wish to tackle suspicions about service overprovision and service quality.

Originality/value

The paper is original in two ways. First, the paper theorizes and tests a mediation process model whereby quality/quantity signals differentially mitigate overprovisioning suspicions, restore personal control and reduce decision deferrals. Second, the paper speaks to the necessity of expanding the traditional signaling literature, designed primarily to detect poor quality hidden in the products/services of lower-quality sellers, to include detecting/solving overprovisioning often hidden in the services provided by higher-quality sellers.

Details

Journal of Consumer Marketing, vol. 38 no. 7
Type: Research Article
ISSN: 0736-3761

Keywords

Abstract

Details

Corporate Fraud Exposed
Type: Book
ISBN: 978-1-78973-418-8

Article
Publication date: 9 May 2016

Marcos Valli Jorge and Wilfredo Leiva Maldonado

The purpose of this paper is to model a credit card market where the retailers may charge differential prices depending on the instrument of payment used by the consumer…

Abstract

Purpose

The purpose of this paper is to model a credit card market where the retailers may charge differential prices depending on the instrument of payment used by the consumer. According to the research agenda proposed by Rochet and Wright (2010), the authors find conditions for the existence of differential prices equilibrium and analyze the effects of that price differentiation on the consumer’s welfare.

Design/methodology/approach

This is done when the consumer has also the store credit as an alternative of payment. The equilibrium prices are computed assuming a Hotelling competition among retailers in both scenarios, when the cost of the store credit provided by the retailer is greater than that provided by the credit card and vice versa.

Findings

From this, the authors prove that the average price under the price differentiation is lower than the single price under the no-surcharge rule; nevertheless, the retailer’s margins remain the same in both situations. Furthermore, some cross-subsidies are expunged when price differentiation is allowed. The authors also conclude that the consumers’ welfare is greater when the no-surcharge rule is abolished. Finally, if the retailers face menu costs whenever they differentiate prices, the authors provide sufficient conditions for differential prices remain as equilibrium.

Practical implications

This is an important input for discussions among regulators and players of the credit card market.

Originality/value

From the analysis the authors can conclude that price differentiation, according to the instrument of payment, is a welfare improving policy. The authors explicitly determine the average price in that setting and the differentiated prices even in presence of costs that arise from price differentiation. The obtained theoretical results can be used as an input for econometric modeling purposes.

Details

Journal of Economic Studies, vol. 43 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 1 December 2003

S. McCartney and A.J. Arnold

The wild boom and slump of 1845‐1847 was the most important of the nineteenth century railway manias, in terms both of its scale and effects on the economy as a whole. It has…

1938

Abstract

The wild boom and slump of 1845‐1847 was the most important of the nineteenth century railway manias, in terms both of its scale and effects on the economy as a whole. It has almost invariably been seen as a market irrationality, a view fundamentally challenged by Bryer’s theorisation of it as a deliberate and collusive device of the “London wealthy”, aided by central government, to swindle provincial middle class investors. This analysis also greatly extended previous perspectives on the rôle of accounting by asserting that accounting practices were crucial to the success of the process and were thus “deeply implicated” in a great, class‐based swindle. The acceptance of such a perspective would have important implications for the way we understand the functioning of accounting and capitalism in the mid‐nineteenth century, but this paper instead argues that such notions are misconceived, looking to both the evidence that was available when Bryer’s paper was written and to recently collected data on the depreciation accounting practices of the time.

Details

Accounting, Auditing & Accountability Journal, vol. 16 no. 5
Type: Research Article
ISSN: 0951-3574

Keywords

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