MARKET-LEVEL EFFECTS OF INFORMATION - COMPETITIVE RESPONSES AND CONSUMER DYNAMICS

Information flowing into a market from firms can stimulate competitive activity and consumer dynamics that ultimately improve the functionin g of that market (e.g., improve product quality), However, prior resea rch has provided limited empirical evidence regarding the conditions u nder which (1) information confers such benefits on the market, (2) fi rms make strategic use of such information flows, and (3) consumer beh avior influences the achievement of these market effects and strategic benefits, The author performs a longitudinal quasi-experiment to inve stigate these issues using the introduction of the Nutrition Labeling and Education Act (NLEA) as a research context. Results indicate that information did promote consumer dynamics that may have fostered compe titive activity among firms. Specifically, marketers changed the quali ty of base brands and their brand extensions in unique and opposite wa ys that enabled brands to occupy distinct strategic positions in the m arket. Market information also influenced the nature of competitive ri valry by shifting price promotion levels depending on the healthy posi tioning of firm brands. Such approaches were speculated to provide fir ms with a means of coping with the uncertainty of competitive and cons umer reactions to the NLEA, extending theories of the market-level eff ects of information to include the strategic use of such information b y firms.