Increasing long-term consumer surplus through a novel product testing mechanism
Presenter
University of Duisburg-Essen
Collaborators
Patrick Imcke, Christiane Ehses-Friedrich,
University of Duisburg-Essen
Doctoral Candidate at the School of Information
Abstract
Our study investigates a novel mechanism to reduce information asymmetry about product quality between buyers and sellers. Product testing organizations like Consumer Reports (US) and Stiftung Warentest (Germany) seek to reduce this asymmetry by providing credible information. However, limited capacity leads to testing of only a select number of product models, often bestsellers, which can yield suboptimal information. A novel mechanism increases consumer surplus in the short term, i.e., when qualities and prices are exogenous (Vollstaedt et al., 2020). In the present paper, we extend Vollstaedt et al.’s analysis to the long term, i.e., to a setting in which qualities and prices are endogenous.