Buyer Valuation Uncertainty and Firm Information Provision Strategies

Abstract

This chapter reviews research on buyer valuation uncertainty originated from information asymmetry between the firm and consumers, and the firm’s information provision strategy. Before purchase, consumers could be uncertain about the product’s vertical attributes, i.e., quality uncertainty, and/or the product’s horizontal attributes, i.e., fit uncertainty. For each type of uncertainty, we discuss the firm’s inventive and instruments to disclose information, as well as other mechanisms to reveal information that help consumers resolve such valuation uncertainty. We then review recent literature on advance selling and opaque selling strategies, where the firm benefits from creating consumer valuation uncertainty. We conclude the chapter with discussions on future research directions.