Reducing Buyers’ Uncertainty About Taste-Related Product Attributes
Working paper version of Journal of Management Information Systems, Fall 2013;30(2):269-299
35 Pages Posted: 25 Jul 2014
Date Written: April 1, 2013
It is becoming increasingly important for firms to know when to take steps to reduce buyers’ uncertainty about their products and services. This article focuses on investments that firms can make to reduce buyers’ uncertainty about taste-related product attributes. Using an analytical model, we show that firms should disclose more taste-related information when the customer segment they directly target represents a larger share of the overall market. We proceed to ask if there are practical ways by which managers can decide if such disclosure investments are financially beneficial to their firm, and find that the variance of consumer reviews can guide such decisions. The article's main contribution is to show that firms must consider the variance, but not the mean, of buyer reviews, to determine the need to invest in reducing consumer uncertainty about taste-related attributes. The article's findings are managerially important due to the ubiquity of consumer reviews. They are novel because almost all previous literature views the mean of the review as the key indicator. Finally they are general in their applicability since they are independent of any assumptions about heuristics that buyers may use to ascertain product quality from the reviews of previous buyers.
Keywords: information dissemination, product ratings, product review variance, consumer uncertainty reduction
JEL Classification: C72, D82, D83
Suggested Citation: Suggested Citation