Managing Quality under Heterogeneous Consumer Demand and Product Quality

dc.contributor.author Carriquiry, Miguel
dc.contributor.author Babcock, Bruce
dc.contributor.author Babcock, Bruce
dc.contributor.department Center for Agricultural and Rural Development
dc.date 2018-02-16T14:43:31.000
dc.date.accessioned 2020-06-30T01:04:45Z
dc.date.available 2020-06-30T01:04:45Z
dc.date.embargo 2015-06-18
dc.date.issued 2005-10-01
dc.description.abstract <p>Based on accepted advances in the marketing, economics, consumer behavior, and satisfaction literatures, we develop a micro-foundations model of a firm that needs to manage the quality of a product that is inherently heterogeneous in the presence of varying customer tastes or expectations for quality. Our model blends elements of the returns to quality, customer lifetime value, and service profit chain approaches to marketing. The model is then used to explain several empirical results pertaining to the marketing literature by explicitly articulating the trade-offs between customer satisfaction and costs (including opportunity costs) of quality. In this environment firms will find it optimal to allow some customers to go unsatisfied. We show that the relationship between the expected number of repeated purchases by an individual customer is endogenous to the choice of quality by the firm, indicating that the number of purchases cannot be chosen freely to estimate a customer's lifetime value.</p>
dc.identifier archive/lib.dr.iastate.edu/card_workingpapers/427/
dc.identifier.articleid 1429
dc.identifier.contextkey 7234590
dc.identifier.s3bucket isulib-bepress-aws-west
dc.identifier.submissionpath card_workingpapers/427
dc.identifier.uri https://dr.lib.iastate.edu/handle/20.500.12876/12773
dc.source.bitstream archive/lib.dr.iastate.edu/card_workingpapers/427/05wp410.pdf|||Sat Jan 15 00:14:00 UTC 2022
dc.subject.disciplines Behavioral Economics
dc.subject.disciplines Industrial Organization
dc.subject.keywords consumer satisfaction
dc.subject.keywords heterogeneous customers
dc.subject.keywords quality expectations
dc.subject.keywords quality heterogeneity
dc.subject.keywords quality management
dc.subject.keywords repeated purchases
dc.title Managing Quality under Heterogeneous Consumer Demand and Product Quality
dc.type article
dc.type.genre article
dspace.entity.type Publication
relation.isAuthorOfPublication be977ffd-4ef3-4f33-a854-9db833e957f4
relation.isOrgUnitOfPublication 1a6be5f1-4f64-4e48-bb66-03bbcc25c76d
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