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Using signals to reduce adverse selection and formulate seller positioning strategies in informal markets
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Pasha, Fahad Mansoor (2021) Using signals to reduce adverse selection and formulate seller positioning strategies in informal markets. PhD thesis, University of Warwick.
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Official URL: http://webcat.warwick.ac.uk/record=b3764389
Abstract
Informal markets suffer from adverse selection. This problem is further compounded by the power and resource inequalities of the people who participate in these markets. In such markets, sellers face the dual challenge of reducing adverse selection and adopting positioning strategies that communicate their unique social positions. To understand how informal market sellers can resolve adverse selection and adopt unique positioning strategies, the study determines the impact of signals on three outcomes – increasing reliability/credibility, reducing price unfairness perceptions, and increasing price. First, a novel framework is developed that shows how word of mouth as the propagation medium is key in sustaining certain signals, while signals that require alternative propagation mediums do not function. Afterward, the study identifies both existing signals and contributes new signals - consistent selling locations, investments in product care, and percentage of credit offered - that can be sustained in informal markets, and shows how sellers with different resource levels can use separate signaling strategies to reduce adverse selection and uniquely position themselves compared to the competition. While high-resource sellers can signal using their financial resources and avoid threats of social isolation, low-resource sellers must signal using their social/personal reputation and thus risk social isolation if product quality is not as expected. Field study results show little buyer confidence in products exchanged, negative bias against low-resource sellers, and widespread use of pseudo-signals. Furthermore, optimal signaling strategies are devised that help sellers achieve the three key outcomes while overcoming differential impact of signals across outcomes. For low-resource sellers, the optimal signaling strategy is to offer a percentage of credit, while high-resource sellers should use calves attached, LPGs, fodder fed, and consistent locations. Lastly, the utility of the results in reducing reliance on pseudo-signals, increasing fairness for low-resource sellers, improving buyer confidence, and creating market interventions is discussed.
Item Type: | Thesis (PhD) | ||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce |
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Library of Congress Subject Headings (LCSH): | Informal sector (Economics), Markets, Commerce, Relationship marketing, Consumer behavior | ||||
Official Date: | December 2021 | ||||
Dates: |
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Institution: | University of Warwick | ||||
Theses Department: | Warwick Business School | ||||
Thesis Type: | PhD | ||||
Publication Status: | Unpublished | ||||
Supervisor(s)/Advisor: | Lee, Nick, 1975- ; Hassan, Magda | ||||
Format of File: | |||||
Extent: | 233 leaves : illustrations, photographs | ||||
Language: | eng |
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