The Price-Perceived Quality Relationship: Experimental Evidence

Although it is generally agreed that the price and perceived quality of a product are highly related, there is still a paucity of empirical evidence demonstrating the form of this relationship. Specifically, price is thought to serve as an indicant of quality whenever there is little previous experience with the product or potential risk or uncertainty involved in its use 4, 7, 8, 10. Stafford and Enis 9, p. 456 adroitly summarize this area of research when they state: It appears obvious to us that if price data provide the only clue to product quality, then perceived quality should be expected to vary directly with price. Recent studies, however, suggest this relationship might not be quite so direct. In a study using three brands of beer (physically identical except for price and brand name) McConnell 5 found a nonlinear price-perceived quality relationship, although its exact form was unspecified. Gabor and Granger 2, 3 had consumers state the highest and lowest prices at which they would consider purchasing certain inexpensive foods and nondurables (e.g., nylon stockings). They then determined sets of upper and lower price limits for each of the products and concluded that within these limits price may well serve as an indicant of quality, but above and below them, respectively, the product will be perceived as being too expensive or of questionable quality. Such results imply the priceperceived quality relationship may be direct or monotonic only within certain intervals, but perhaps nonlinear or even discontinuous outside of these intervals. Given this lack of evidence concerning the nature of the price-perceived quality relationship the purpose of this study was to experimentally investigate this relationship for a specific product in an attempt to document its underlying nature. Specifically, it was hypothesized that for a product about which there is a lack of information, (1) price would serve as a major determinant of quality perception, and (2) this price-perceived quality relationship would be nonlinear. METHODOLOGY Product