Quality signaling strategies of experience goods in online–offline channel integration

Abstract

Many firms nowadays integrate online and offline channels to deliver quality information by prices and experience services. This paper explores the optimal signaling strategies when a high‐type firm introduces product‐irrelevant experience services. We find that the optimal strategies depend highly on the quality difference and consumers' prior belief. When the quality difference is small, the high‐type firm can earn the first‐best profit. However, when it is big and the prior belief is low, the firm may suffer from a loss in profit. Furthermore, the cost of pure display service plays an important role in deciding the product‐irrelevant experience service.