The Signaling Impact of Low Introductory Price on Perceived Quality and Trial

Abstract

Economic signaling theory suggests that consumers interpret price withinthe context of market conditions. Under specific conditions it predicts thatlow price may signal high quality. Results from an experiment designed totest the behavioral assumptions underlying this prediction indicate thatconsumers intentions to purchase conform to the predictions of economicsignaling theory, but their judgments of product quality do not. The resultssuggest that consumers' response to signals may be more complex thanpreviously shown.