In this paper, the Hotelling model is utilized to examine the choice of MBG (money-back guarantees) for high-quality and low-quality retailers in the presence of bounded rational consumers. The equilibrium pricing strategy is found by the Nash equilibrium under four different MBG modes. And our model is extended to the setting in which incorporates the product quality and retail quality simultaneously. It is found that in a market with product quality symmetric, both firms offer the MBG in equilibrium and the MBG is beneficial to low-quality firm while unfavorable to high-quality firm. However, in a market with product quality asymmetric, the low-quality firm may not be willing to offer the MBG and the MBG is profitable for high-quality firm for most cases. The MBG can be profitable to low-quality firm only when the product quality difference is not so distinct and the quantity of bounded rational consumers is large enough.
HUANG Zong-sheng, NIE Jia-jia, ZHAO Ying-xue
. Money-back Guarantees in the Presence of Bounded Rational Consumers[J]. Chinese Journal of Management Science, 2016
, 24(1)
: 116
-123
.
DOI: 10.16381/j.cnki.issn1003-207x.2016.01.014
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