THE EFFECTS OF ADVERTISED AND OBSERVED QUALITY ON EXPECTATIONS ABOUT NEW PRODUCT QUALITY

The authors describe a model of the effects of advertised and observed duality on consumer expectations about new product quality. They test the model using data from two computer-controlled shopping experiment s. In both studies, quadratic and gamma specifications for the effect of advertising claim discrepancy on expectation change fit better than a Furthermore, the adaptive expectations framework linear model. Furt hermore, the adaptive expectations framework describes the updating of consumer expectations when the consumer observes the quality of the n ew 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.