Environmental Factors in Operations Management: The Impact of Air Quality on Product Demand

Forthcoming, Production and Operations Management

45 Pages Posted: 1 Apr 2021

See all articles by Ying Ding

Ying Ding

Renmin University of China - School of Business

Yanping Tu

University of Florida - Department of Marketing

Jingchuan Pu

Pennsylvania State University - Smeal College of Business

Liangfei Qiu

University of Florida - Warrington College of Business Administration

Date Written: March 19, 2021

Abstract

The operations management literature has recently begun to analyze how novel data sources help practitioners better understand product demand. We extend this stream of research by analyzing how air quality, a prominent environmental factor that has received little attention in prior studies, can impact product demand. Specifically, we examine how air quality affects the demand for different product color options, and find a greater demand for blue-color product option on air-polluted days (vs. clear days). We attribute this pattern to compensatory consumption induced by need deprivation. Specifically, poor air quality deprives people of the visual experience of seeing a blue sky, leading them to seek compensation by acquiring blue-color options. By analyzing a three-year purchase-related dataset from an online retailer (Study 1) and conducting a field experiment (Study 2) and two laboratory experiments (Studies 3 and 4), we establish the external validity, internal validity, and robustness of this finding. We also provide empirical support for deprived visual experience as the mechanism: The proposed effect is driven by air quality indicators that affect visibility (Study 1) and is mediated by experienced visibility (Study 3). We further identify a theoretically relevant individual difference variable as a moderator: prior experience with air pollution, which strengthens the proposed effect in the laboratory setting because prior experience enables people to “relive” the deprived visual experience more vividly (Study 4). Given the prevalence of air pollution across the globe, our research sheds light on how practitioners can improve their operational decisions by factoring in air quality.

Keywords: demand forecasting, environmental factors, air quality, product options, compensatory consumption

Suggested Citation

Ding, Ying and Tu, Yanping and Pu, Jingchuan and Qiu, Liangfei, Environmental Factors in Operations Management: The Impact of Air Quality on Product Demand (March 19, 2021). Forthcoming, Production and Operations Management, Available at SSRN: https://ssrn.com/abstract=3807625

Ying Ding

Renmin University of China - School of Business ( email )

Beijing
China

Yanping Tu

University of Florida - Department of Marketing ( email )

Gainesville, FL 32611
United States

Jingchuan Pu (Contact Author)

Pennsylvania State University - Smeal College of Business ( email )

University Park, PA 16802
United States

Liangfei Qiu

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

HOME PAGE: http://sites.google.com/site/qiuliangfei/

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