Arguing the Value of Product Quality Signaling in the Presence of Negative Publicity

Abstract

Drawing on argumentation and signaling theories, this study designs an escalating warrant model and examines the manner in which it connects to the influence of negative publicity. A parsimonious framework is developed for forming the multiple product warranties and assessment of the separate and simultaneous effects. The experiment shows that consumers do reason with sellers’ product quality information, while they are easier to convince and infer a higher level of seller credibility when there are more types of warrant. However, this positivity can be reversed and cause significantly greater damage to the seller’s standing in the face of negative publicity.