Risk profile and consumer shopping behavior in electronic and traditional channels

This paper develops an economic model that captures consumer shopping channel choices based on shopping channel characteristics and consumer risk profiles – risk-neutral or risk-averse. Analyses of results show that after making purchases through one channel, electronic or traditional, risk-averse consumers tend to be more loyal customers than risk-neutral consumers. Further, the two types of consumers may exhibit split channel behavior – risk-neutral consumers prefer one channel and risk-averse consumers prefer the other. However, risk-neutral consumers are not always more likely to prefer electronic channel than risk-averse consumers. Implications for retailer pricing strategies are discussed.