The Use of Price and Warranty Cues in Product Evaluation

The joint effect of price and warranty information on consumers' perceptions of product quality, risk and ultimately purchase intention, is the primary focus of this study. Specific theories such as the price-quality relationship and signal theory for warranties are tested in a cross-cultural context. Based on some relevant Chinese cultural traits the theoretical relationships are modified and a set of testable hypotheses are developed for consumers in Hong Kong, which represents a unique mix of Chinese culture combined with Western influence. Two experiments are conducted in Hong Kong. The first examines the relative positions of price, warranty and quality within the typical decision structure of consumers. The second studies the effect of price and warranty on perceived quality, risk and purchase intention within the framework of a causal model. Estimation results with the Hong Kong data are compared with those using U.S. data. We find similarities in the way warranty information is discounted as a signal of quality but affects risk perception. Hong Kong consumers are different in their use of the price cue-they use it as a signal of quality as American consumers do, but price does not seem to affect perceived risk. Price has more of an informational than allocation role in the Hong Kong consumer's purchase decision. Implications for international marketing strategy are discussed.