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The Effects Of Advertised And Observed Quality On Expectations About New Product Quality

Praveen K. Kopalle, Donald R. Lehmann

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The authors describe a model of the effects of advertised and observed quality on consumer expectations about new product quality. They test the model using data from two computer-controlled shopping experiments. In both studies, quadratic and gamma specifications for the effect of advertising claim discrepancy on expectation change fit better than a linear model. Furthermore, the adaptive expectations framework describes the updating of consumer expectations when the consumer observes the quality of the new product. In this setting, the observed quality is more influential than the advertised quality in changing expectations, and “good news” is discounted, whereas “bad news” is more readily accepted.