Information Asymmetry and Levels of Agency Relationships

1998/08/01 by Debi Prasad Mishra, Jan B. Heide, Stanton G. Cort · 7 citations
Business, Management and Accounting · #Customer Service Quality and Loyalty #Consumer Market Behavior and Pricing #Franchising Strategies and Performance

paper · doi:10.1177/002224379803500301

Abstract

Many marketing exchanges are characterized by an information asymmetry between suppliers and customers. Specifically, customers are faced with both adverse selection and moral hazard problems that involve, respectively, uncertainty about supplier characteristics and the risk of quality cheating. Drawing on prior research, the authors propose that agency problems in a customer relationship can be resolved by means of customer bonds and price premiums, which serve as signals and supplier incentives, respectively. The authors also propose that adverse selection and moral hazard problems exist in relationships between suppliers and their employees. Similar to the customer relationship, these problems can be addressed with signals and incentives of various kinds. The authors present hypotheses regarding the agency problems in both of these relationships and test them empirically in the context of automotive service purchases. Data obtained from 287 service managers support the hypotheses. The data also suggest that institutional differences across service outlets (e.g., ownership structure and size) influence how the two types of agency problems are managed.

Citations

• A Paradigm for Developing Better Measures of Marketing Constructs
• Information and Consumer Behavior
• Technical complexity and consumer knowledge as moderators of service quality evaluation in the automobile service industry
• The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields
• Alliances in Industrial Purchasing: The Determinants of Joint Action in Buyer-Supplier Relationships
• The Behavioral Consequences of Service Quality
• Servicescapes: The Impact of Physical Surroundings on Customers and Employees
• A Paradigm for Developing Better Measures of Marketing Constructs

Cited by

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• Enhancing Long-Term Welfare in Recommender Systems: An Information Revelation Approach
• Auditing Pay-Per-Token in Large Language Models
• Building Effective Online Marketplaces with Institution-Based Trust
• Food for the soul: religious identity and ethical halal labelling in sharing economy apps

Related

• Who Wants Consumers to Be Informed? Facilitating Information Disclosure in a Distribution Channel
• Adverse Selection or Moral Hazard, An Empirical Study
• Consumer Trust, Value, and Loyalty in Relational Exchanges
• The role of communication content and reputation in the choice of transaction partners : a study based on field and laboratory data
• Price Discrimination in the Presence of Customer Loyalty and Differing Firm Costs