REPUTATION DYNAMICS IN MARKETING CONTEXTS

Abstract

This dissertation is an examination of the impact of dynamic consumer reputation effects on firm decision-making in the marketplace. Essay I is a study of the impact of firm interventions on competitive reputation building among consumers on an online platform. Specifically, I model an actor’s decision to upload pirated content in order to build his reputation, despite facing threats from copyright lawsuits (firm interventions seeking to deter uploading activity) and intense competition on the platform. We propose a novel theory that explains what could occur in this scenario: high-reputation consumers will decrease their reputation-building activity, but their low-reputation competition may see an opportunity to enhance their reputation and increase activity. We argue that because competition for reputation is active on the site, the lawsuits may deter uploading in the short-run but may actually lead to more piracy over the long-run. Our findings support the theory: while high-reputation publishers decrease the likelihood of uploading as lawsuits increase, low-reputation uploaders do the opposite: they upload more. Essay II is an examination of the impact that a consumer group's reputation can have on firm decision-making. Specifically, we investigate 1) conditions under which a non-prejudiced firm may discriminate in service against its consumers based on group reputation, and 2) how subsequent consumer word-of-mouth can impact demand and profits over time. This mixed-methods study shows that discrimination can be profitable in the short-run but can backfire in the long-run due to the effects of consumer word-of-mouth and firm competition. Results indicate that high consumer heterogeneity in quality (i.e., their profitability to the firm) and low measurement error in detecting consumer quality attenuate the magnitude of service discrimination. The authors provide managerial recommendations on reducing service discrimination's profit-damaging effects. This research emphasizes the long-term benefits of switching to a service policy that does not use group reputation information. This dissertation contributes to the general marketing literature by providing new insights into how the reputation of the consumer, a sparsely researched area, can have direct impact on the firm in its decision-making.