Title

Customer Perception and Competitive Quality Strategy

Publication Type

Journal Article

Publication Date

1993

Abstract

The objective of this paper is to determine the optimum level of quality a firm should choose in a product/service, given the customers' perceptions of quality and the reference standard in a competitive market. Our work on this quality selection problem differs from those of past researchers in that we model explicitly customer's perceptions and the reference standard. We develop a game-theoretic model to obtain insights into the firms' quality selection problem. The model results suggest that the market differentially provides rewards or penalties to firms depending upon customers' perceptions as well as other market and product-specific parameters. We contrast our findings for an oligopolist with that for a monopolist and observe that although an oligopolist often provides a better quality product, he does not do so always; especially when perceptions are sufficiently weak and the reference standard is endogenous.

Discipline

Marketing

Research Areas

Marketing

Publication

Managerial and Decision Economics

Volume

3

Issue

3

First Page

235

Last Page

246

ISSN

0143-6570

Identifier

10.1002/mde.4090140304

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