Prevailing information asymmetry in business processes alters the market dynamics. Quality uncertainty ensues from this phenomenon. Philosophy of information economics is implemented to correlate total quality management (TQM) practices in industry with quality perceived by customers. Quality perception, a newly coined term, is discussed at length, along with causal factors. This paper aims to provide a system dynamics framework for quality perception and to investigate the role of the changing level of market‐side enablers on quality perception.
System dynamics is used for modeling and analysis. To realize the impact of information asymmetry on quality perception, simulation runs are carried out for an Indian case.
Enablers, such as advertising, word‐of‐mouth, rebate, warranty and guarantee, mitigate the effect of information asymmetry on quality perception, and commensurately translate TQM to market value.
The study of some aspects of information asymmetry and quality perception is attempted. Further study is required to understand repercussions of information asymmetry on the complete supply chain processes.
The model has a practical relevance to implement quality perception enhancement by deciding upon the policy mix.
With quality perception defined and modeled, the paper attempts market orientation to quality paradigm.
