Quality signaling strategies of experience goods in online-offline channel integration

Many firms nowadays integrate online and offline channels to deliver quality information by prices and experience services. This paper explores the optimal signaling strategies when a high-type firm introduces product-irrelevant experience services. We find that the optimal strategies depend highly on the quality difference and consumers' prior belief. When the quality difference is small, the high-type firm can earn the first-best profit. However, when it is big and the prior belief is low, the firm may suffer from a loss in profit. Furthermore, the cost of pure display service plays an important role in deciding the product-irrelevant experience service.