The Effect of Prior Knowledge on Price Acceptability and the Type of Information Examined

This article assesses whether differences in prior knowledge result in differences in (1) price acceptability and (2) the extent to which different types of information are examined. Using a personal computer-based methodology, subjects who varied in their prior product knowledge provided price responses, and the time they spent examining various kinds of information was measured. Acceptable price-range end-points (price limits) were foun ~ to be lowest for low-knowledge subjects. Further, the extent to which price and related extrinsic information was examined was found to be lowest for moderately knowledgeable subjects. Results from a second study provide substantive support for the claim that increasing prior knowledge is accom-panied by an increase in both limits of the acceptable price range. P rior knowledge, or the information held in an in-dividuals memory, appears to facilitate easier and more efficient processing of information because knowledgeable consumers are able to focus on those pieces of information that are relevant to the task at hand (Johnson and Russo 1984). Further, knowledge-able consumers are capable of making more refined category-related judgments, thus allowing them to evaluate products relative to other, appropriate mem-bers of the same (finer) category of products (Rosch et al. 1986). Because of this ability to compare a product with the appropriate referent product, knowledgeable consumers are more likely to identify and select prod-ucts of relatively superior quality. It has also been suggested in the behavioral pricing literature that prior knowledge moderates the effect of price on perceived quality and influences the prices consumers are willing to pay-the acceptable price range-for a given level of quality (Lichtenstein, Bloch,