Reputation, learning and quality uncertainty

Abstract

Claims that, for many types of product, quality can be uncertain even after purchase and use, especially in services industries. Asks, if consumers cannot “learn” about the quality of a firm’s products, then what criteria will consumers use to judge product quality? Aims to develop a conceptual basis for analyzing this phenomenon structured around the idea that consumers use informational “surrogates.” Explains that such surrogates in turn have to be learned by consumers and also signaled by firms. Suggests that many such surrogates are based on the idea at the heart of herding behavior where prospective buyers group with others, so that they can use choices made by others as information to support their own choices. States that, under such conditions, factors such as the “size” of a firm’s client base, or the “age” of the firm may help consumers to learn about the firm’s product quality.