Price—quality integration in warranty evaluation a preliminary test of alternative models of risk assessment

Abstract

In two conceptual replications of Shimp and Bearden (1982), subjects reported ratings of perceived risk based on three dimensions of a new product introduction: warranty coverage, warrantor reputation, and price. In the first study, several two- stage integration rules, derived from Anderson's (1982) functional measurement methodology, were proposed to account for the findings. Contrary to past research suggesting the existence of subtractive price-quality trade-offs, a subject-by-subject analysis of the data suggests the existence of both subtractive and nonlinear integration rules. A second experiment tested a more specific single-stage risk model in a subject replication design. As expected, the second study provided statistical evidence confirming the graphical evidence of the first study. Together, these studies a) constitute a successful replication of Shimp and Bearden's (1982) work on warranties, and b) demonstrate that subtractive integration rules do not adequately explain risk reduction efforts in warranty assessments with new product innovations.