Consumer Risk-reduction Behavior and New Product Purchases

Koichi Yonezawa, Timothy Richards

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

Consumers purchase lower quantities of new products compared with those they have purchased in the past. We explain this observation as a result of risk-averting behavior by utility-maximizing consumers. If a new product involves a higher degree of risk that quality expectations will not be met compared with an incumbent product, we show that utility will be more concave for the new product. We test this prediction using a multiple-discrete/continuous extreme value (MDCEV) model of demand. We show that utility is indeed more concave for new products relative to previously purchased products.

Original languageEnglish (US)
Pages (from-to)1003-1016
Number of pages14
JournalManagerial and Decision Economics
Volume38
Issue number7
DOIs
StatePublished - Oct 1 2017

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management
  • Management Science and Operations Research
  • Management of Technology and Innovation

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