Abstract

Purpose: This study attempts to provide empirical evidences on the effect of buyers' risk propensities on market outcomes under information asymmetry. We have analyzed experimental data to understand how each individual buyer's purchase decision is associated with her risk propensity in order to suggest effective target marketing strategies under information asymmetry. Research design, data and methodology: We have examined 362 subjects through an experimental method with detailed purchase scenarios to estimate buyers' purchase decisions under information asymmetry along with the measurement of each subject's risk propensity through their lottery choices focusing on the level of acceptable risk. Results: Our experimental analysis has shown that the buyers who prefer to purchase products with revealed negative aspects are actually more risk-averse, and the buyers who choose products with concealed negative aspects are more risk-taking. However, we have not found predicted purchase patterns within the buyer groups of similar risk propensities. Conclusions: This study provides meaningful empirical evidences on the theoretical literature about how risk propensities of buyers affect seller’s decision to reveal negative information. The finding from this study is thus expected to suggest how to carefully design targeted marketing communications under information asymmetry based on each individual customer’s risk propensity.