In‐store service decisions under consumer disappointment aversion

Abstract

This study investigates how retailers invest in‐store service by considering the possible service failure that occurs in a store, and consumers' disappointment concerns it causes. Specifically, we establish an analytical framework to examine several competitive scenarios. The results reveal that, first, the presence of disappointment concerns always decreases the in‐store service level in equilibrium, while ignoring it by retailers may result in their overinvestments in in‐store service. Although conventional wisdom may suggest offering more in‐store service to consumers helps the traditional retailer compete with online rivals, this may not be true in the presence of disappointment aversion.

Impacts of consumer regrets on product demos and pricing strategy in new product release

“…They examined the intertemporal pricing of a product, that is, studied the utility difference of buying the same product in different periods. Wang (2021) analyzed the effect of consumers' disappointment (elation) in an offline-online retail competition context and modeled consumer disappointment resulting from a higher prior expectation and an in-store service failure. He found disappointment concern always decreases the in-store service.…”