A Consideration of the Pricing Structure of Aesthetic Services: An Example of Consumer Decision Making with Ambiguous Information

Abstract

This study discusses the microstructure of the prices of aesthetic services using the model developed by Epstein and Schneider [1]. Because ambiguity regarding the quality of novel aesthetic technology prompts consumers to behave based on the assumption of the worst possible outcome, the demand for aesthetic services is low before the consumer experiences a novel aesthetic service. In addition, even though visitors see signals of the good quality of future services through their first experience, they remain pessimistic regarding the quality of the future services because of the variance in outcomes. For consumers, purchasing multiple tickets in one specific salon increases idiosyncratic risk. Thus, transparent information is crucial to increasing demand.