Price-quality Relationship Research Articles

Perspective of Created Value in Consumer Choice: Comparison of Economic and Ecological Dimensions

This paper aims to identify and categorize the factors influencing consumer goods’ value into ecological and economic dimensions and subsequently compare them. The analysis employs the Allegro Reviews (AR) dataset, comprising post-purchase product reviews, with a focus on a sample of 1,400 randomly selected reviews from a pool of 10,615 comments. Through this examination, distinct influencing factors are identified, categorized as either ecological or economic, and their frequency of reference in online reviews was compared. The research findings show that consumers consistently address economic dimensions in their reviews. Notably, emphasis is placed on goods’ quality, pricing, and the price-quality relationship. On the other hand, ecological aspects receive limited attention in reviews, suggesting their lesser significance to consumers compared to economic considerations. This study’s implications for theory and practice indicate that companies should prioritize economic aspects in their value creation endeavors, relegating ecological factors to a secondary role. However, from a global standpoint, enterprises must incorporate ecological dimensions during the value creation process to avert environmental degradation, which could otherwise undermine overall societal quality of life. In terms of originality and value, this research diverges from typical consumer choice studies that rely on questionnaires. Instead, it analyzes actual post-purchase product reviews, providing insights into tangible elements contributing to goods’ value, thus bypassing reliance on mere declarations. JEL Classification: D11, D12, L25, L26.

Analyzing the Nexus between Personal Values and Consumption Values of Consumers’ Preference for Fresh Fish

This study aimed to investigate the nexus between personal values and consumption values towards consumers' preferences for fresh fish. A cross-sectional data of 300 respondents was selected using a multi-stage random sampling procedure. A well-structured questionnaire and personal interview were used to collect data from the respondents. Factor analysis and canonical correlation analysis were conducted to achieve the study’s objectives. Findings showed that females (67.5%) were the majority of respondents, household size ranged between 4-6 persons, and many (76.7%) were married. The mean age was 41 years, and 83.3% were formally educated. The relationship between personal values and consumption values was positive and statistically significant at the 1% level. The study revealed that variables like benevolence, security and self-direction were strongly correlated with emotional and functional values of the first canonical covariates. The study concludes that high benevolence, security and self-direction evoke high emotional and functional values when consumers buy fresh fish. Based on these findings, the study recommends that fresh fish marketers should pay more attention to the price-quality relationship, the performance and content of the product and the quality of packaging, as most respondents place more value on what they consume.

Price-quality relationships for the main livestock feed types in the Ethiopian feed market

This study assessed the price-quality relationships for the major feed products in Ethiopia with a view to informing policy makers on possible avenues to develop the livestock feed sector in the country. A survey of livestock feed markets was conducted from April to May 2019 in five regions (Amhara, Southern Nations Nationalities and Peoples Region (SNNPR), Oromia, Tigray and Addis Ababa). A total of 1700 feed samples with their respective price information were collected from 202 marketplaces. The collected samples were analyzed for their crude protein (CP), neutral detergent fibre (NDF), acid detergent fibre (ADF), in vitro organic matter digestibility (IVOMD) and metabolisable energy (ME) content. Results showed considerable variability in quality within the same feed type. Pearson correlation and regression analyses showed that price-quality relationships for the feed samples were either very weak or non-existent. Wheat bran showed a weak price to quality correlation for CP (r= 0.200 at P<0.01), ME (r= 0.202 at P<0.01) and IVOMD (r= 0.221 at P<0.01). Among the roughages, grass hay showed slight positive price to ME correlation (r= 0.382 at P<0.001) and a slight negative relationship with ADF (r=-0.336 at p<0.005). The results of this study indicated that quality attributes have no, or a limited role in setting market prices for most feed types in the Ethiopian feed market. The fact that both good and poor-quality feeds are sold under the same label and market value affects both traders and livestock producers. Therefore, it is important to build national feed analytical capabilities to allow quality of feeds to be checked against national feed standards, particularly for concentrate feeds.

Not Just about Price: How Benefit Focus Determines Consumers’ Retailer Pricing Strategy Preference

Abstract Recent research has highlighted a difference in the way consumers approach choice sets. Some consumers focus on products’ quality benefits (vertical differentiation): their selections are driven by the level of quality obtained relative to the price paid. Other consumers focus on products’ taste benefits (horizontal differentiation): their selections are driven by acquiring personal tastes at favorable prices. This article aims to investigate how consumers’ benefit focus, a continuum anchored by quality and taste, drives their preferences between retailers differing in pricing strategies. All else equal, consumers who focus on taste benefits will prefer EDLP stores (infrequent discounters), while consumers who focus on quality benefits will prefer Hi-Lo stores (frequent discounters). Findings from our experiments and an analysis of consumer panel data corroborate this relationship. This work also shows the mediating role of perceived value and the effect of several moderators: the strength of the price–quality relationship, the pattern of discounts, and cherry-picking costs.

Antecedents of mobile device purchase intention by mobile gamers

PurposeThis study aims to verify the antecedents influencing mobile gamers’ intentions to purchase mobile phones. To this end, the constructs price–quality relationship, price sensitivity, perceived quality, identification with the group of gamers and referrals from other gamers were identified in the literature.Design/methodology/approachData were collected through an online questionnaire with 335 consumers. The model was tested using partial least squares.FindingsIt was verified that the price–quality relationship directly influences mobile gamers' intentions to purchase mobile phones. Also, it was observed that price sensitivity of mobile gamers directly influences the price–quality relationship and indirectly influences the intention to purchase mobile phones to play games. It was further verified that this price sensitivity is directly influenced by the perceived quality of mobile gaming devices. Finally, it was observed that referrals from other gamers directly influences the perceived quality and onès identification with the group of gamers.Research limitations/implicationsThis study concluded that developing strategies focused on prices of mobile phones gamers use to play games tends to influence mobile gamers' purchase intentions. This paper extends the study of mobile device purchase behavior, uniting constructs studied separately and proposing connections not yet tested, assisting in the theoretical understanding of the factors that contribute to the intention to purchase mobile devices.Originality/valueThis study is theoretically justified for four reasons: it focused on a specific group of consumers, mobile gamers, which is a constantly growing audience; it brought an innovative model, testing the influence of the perceived quality of mobile gaming devices on the price sensitivity of mobile gamers; there are spaces for new research on mobile device purchase intention; and it may assist in the theoretical understanding of the factors contributing to mobile device purchase intention.

The Impact of Store Brands on Intangible Aspects of Consumer Welfare

This research investigated how an intangible component of consumer welfare can derive from the presence of store brands in durable-product categories. The objective was to explore the degree to which consumers can more reliably depend on price as an accurate indicator of quality in those product categories in which store brands are present. When a strong price-quality relationship exists, consumers may confidently choose a given level of quality chiefly on the basis of price. The focal measure was the correlation between price and quality, computed separately for those categories in which only national brands were present and for those categories in which both store brands and national brands were present. Examination of the price and quality of 14,234 individual brands from the U.S. and other countries tested by Consumer Reports revealed that when store brands were present the strength of the relationship between price and quality exceeded the strength of the respective relationship when store brands were absent. Counterfactual simulations confirmed the relationship.

Dynamic pricing, reference price, and price-quality relationship

The price-quality relationship receives attention from both practitioners and scholars. Yet, the reference price effect, a central aspect in modeling consumer behavior, is absent from the debate. This article addresses the role of the reference price dynamics in understanding the price-quality relationship. We develop an optimal control model of the dynamic behavior of a firm setting price and quality investment over time, accounting for a reference price effect based on prior selling prices. We contribute to the literature on the price-quality relationship by highlighting the conditions under which better quality may drive a lower price when consumers are prone to a reference price. Analytical results show that a counterintuitive negative price-quality relationship may appear even with a linear demand function. Numerical results emphasize the importance of the initial market conditions in the negative price-quality relationship.

An Economic Model for Popular Event Promotions

Abstract This study provides a theoretic framework for price promotions on seasonal events and popular events, such as anniversary, Christmas, and World Soccer Cup. Firms engage in collective price promotions seems to contradict economic wisdom because promotions are less likely to stand out among competitors in popular events. In a rational expectations model, this study shows all players’ performance improve in the equilibrium. Furthermore, even less-famous goods benefit from collective price promotions in which the theoretic framework can provide a guideline to manufacturers and retailers. JEL classification number: D21, M21. Keywords: Event Promotions, Price-Quality Relationship, Advertising.

A temporal construal theory explanation of the price-quality relationship in online dynamic pricing

According to construal theory, the desirability of a product influences consumers’ choices from a temporally, socially, spatially and hypothetically distant perspective. The purpose of this study is to test the temporal dimension of such theory with reference to hotel room prices, also distinguishing by firm size. Temporal distance is measured through the days of advance booking, in a varying-coefficient model reflecting both the dynamic pricing behaviour of the supply and the seasonal oscillation pattern of the demand. Results support the appropriateness of the temporal construal theory as an interpretative framework for the effectiveness of dynamic pricing, from the perspective of behavioural psychology. On average, the influence of quality on price in small hotels is lower than in large hotels; however, its variability is higher in small hotels. Large hotels charge a premium price during peak season dates, while small firms apply discounts, likely aiming to reach full occupation.

Motivated Inferences of Price and Quality in Healthcare Decisions

Policy makers have increasingly advocated for healthcare price transparency, whereby prices are made salient before services are rendered. While such policies may empower consumers, they also bring price to the forefront of healthcare choices as never before, with yet underexplored consequences on consumers’ decisions. This article explores one: using price as a signal of quality. Five experiments demonstrate how healthcare consumers may come to form price-based inferences of quality and explore how these inferences may vary as a function of individuals’ health insurance coverage. Specifically, relative to high-coverage consumers (for whom insurance covers a relatively greater portion of healthcare expenses), low-coverage consumers (for whom insurance covers relatively less) tend to both choose lower-priced providers and perceive a weaker price-quality relationship, suggestive of motivated reasoning. Our work exposes one way in which price transparency policies may have divergent effects on low- versus high-coverage consumers, with direct implications for policy.

Quality improvement and process innovation of a firm facing reference price effects in a dynamic monopoly

ABSTRACT In this article, we investigate a monopolist’s efforts for product innovation (or quality improvement) and process innovation (or reducing marginal production cost) with reference price effects in a dynamic setting. The significant features of our work are: (i) a monopolist deals with customer behavior according to economic principles and determines the price of the product, besides, the monopolist carries out the activities of product and process innovation; (ii) the consumers’ demand structure depends on product price, product quality and reference price, and takes a separable multiplicative way between the state variables (product quality and reference price) and the control variables (product price). Our main results suggest that (i) there exists unique saddle-point steady-state equilibrium under monopoly and social planning; (ii) as the memory parameter increases, it is very likely that the monopolist’s steady-state effort for process innovation is greater than that for product innovation; (iii) the efforts for product and process innovation under social planning are greater than that under monopoly; (iv) although the price is still determined by the monopolist under the social planning, the price under the social planning is higher than that under monopoly and (v) there is a negative price-quality relationship.

Behavioral response to price: Data-based insights and future research for retailing

An important area of pricing research is behavioral response to price. Researchers have studied topics such as the psychophysics of price (the relationship between stimulus and response), willingness-to-pay, the price-quality relationship, and other topics. In this paper, an integrated review, critical analysis, and synthesis of the extensive extant research in four critical areas of behavioral response to price are examined: reference price, latitude of price acceptance, asymmetric price response, and perception of fairness in pricing. As an integral part of the review and analysis, the theoretical underpinnings of these four concepts are presented. Retailing decisions and strategies are directly related to consumer behavioral response to pricing policies: managers want to know what the width of latitude of price acceptance might be, or if there is heterogeneity in the loss aversion effect, and what the moderators of this effect could be. Our review, analysis, and synthesis yield a rich set of data-based insights. For instance, the width of latitude of price acceptance is 1.5 times the price variability, and the width is larger below the reference price. Additionally, loss aversion is robust across businesses, as well as categories and methods of study, but the specific estimates of the effect range from a low of 1.31 to a high of 3.5. Where applicable, the antecedents and moderators of these insights are investigated, such as: loss aversion is moderated by product knowledge (with greater knowledge, the effect is more attenuated), and, in revenue management retail businesses such as hotels and restaurants, by familiarity of pricing practices (greater familiarity, lower loss aversion effect).

The cost of ignorance: reputational mark-up in the market for Tuscan red wines

PurposeThe purpose of this paper is to provide an empirical investigation of the idea that imperfectly informed consumers use simple signals to identify the characteristics of wine, for example, the geographical denomination. The reputation of a denomination will thus be an important guide for consumers when assessing individual wines.Design/methodology/approachThe price–quality relationship is studied in a fairly homogenous geographical area where a large number of wine types is present. This is done by using a simple ordinary least squares (OLS) analysis on a database of more than 2,000 different red wines produced in a period of just four years in only one Italian region.FindingsThe results show that some denominations have a lower average quality score and that price differentials between denominations are linked to differences in average quality, although consumers tend to exaggerate the quality gap between prestigious denominations and others.Research limitations/implicationsA producer in a prestigious denomination benefits from a substantial mark-up relative to an equally good producer from another denomination. Furthermore, denomination neutral wines have a stronger price–quality relationship than denomination specific wines.Practical implicationsConsumers should not be misled by what is on the bottle, but should rather consult wine guides to become better informed before purchasing.Social implicationsThe fact that quality and sensory characteristics often play a minor role in determining the price of a commodity is not immediately compatible with the postulate that consumers are well informed.Originality/valueUnlike previous work, this paper investigates a limited area (Tuscany) and only red wines, thus making it possible implicitly to control for many other factors which might otherwise confound the price–quality relationship.

The Necessity to Assess the Electromagnetic Environment Near 5-G Radio-Emitting Objects with Instrumental Procedure

The features of the new 5G standard if compared to the currently used 4G lie within a significant frequency range expansion, and the implementation of the Internet of things. They made it impossible to expand the existing safety standard of broadband cellular network construction in large cities to the new standard. Differences between the Western and Russian approaches to the maximum permissible power level assessment and the lack of publications on the subject prompt measurement experiments in order to obtain an approximate electromagnetic environment assess near radio-emitting objects. At the preliminary stage of the measurements, it is necessary to choose the right measuring instruments and procedures, since the choice determines the price-quality relationship of the experiment. In the paper the results of the analysis for the known measuring instruments are given with an account to the special requirements formulated according to 5G standard features. The conclusion on the availability of the measuring instruments with the required characteristics is made. It is shown that the experiment efficiency depends on the measurement area dimensions and the measurement points spacing. In case of reflector antenna of 0.9 m diameter operating at 6 GHz the number of measurement points can be reduced without a loss of accuracy if the measured antenna passport data as well as the recommendations given in the paper are taken into an account.

Reputation and relative price positioning of small wineries in Québec, Canada

Purpose In a highly competitive market, the price of wine is a variable controlled by suppliers to suggest a level of quality. An index of relative firm position in the market based on relative prices is calculated for a sample of wine producers. The purpose of the paper is to analyze some of the factors related to the characteristics of a firm and quality that may explain the price strategy of wine producers in a new and small wine region, i.e. Québec province in Canada. Design/methodology/approach Data on types of wines and prices are collected from a sample of 40 small wine producers in Québec, Canada for the selected years 2008, 2010 and 2015. Findings The authors demonstrate that a high price strategy is significantly related to the reputation of the vineyard rather than the age of the domain, the size or the number of wines produced. Research limitations/implications The analysis has been carried out based on a data set of only 40 firms for which the price-position index could be calculated. Unfortunately, only limited information is available on producers and production volumes. Practical implications This analysis is of particular relevance for small or new wine-producing regions, which lack an established reputation. Because wine quality and taste differ by geographic origin and variety, new wine-producing regions may have opportunities to define a wine’s image (or a winery image) and the producer must inform the market on quality of the wine by reflecting it on the final selling price. Originality/value Prior works on the analysis of the price-quality relationship give rise to various and sometimes contradictory results. This analysis is of particular relevance to explain the price strategy of small wine producers in a strongly competitive market where the price remains an obvious commercial argument to signal the quality of a wine.

An analysis of the dynamic price-quality relationship

In this paper we develop a dynamic model in which demand depends on both price and quality. The objective function maximizes the profit and the salvage value of the firm. In part, quality can be increased by investing into development processes and the value of the accumulated quality knowledge is incorporated into the model. It is pointed out that this salvage value may have large impact on the solution and fundamentally may influence the dynamics of the quality improvement process. The quality dynamics may have both increasing and decreasing impact on price, and besides known factors the influence of the Hamiltonian is identified. We can observe also, that improving operational efficiency softens price increase while quality increases.

When better quality or higher goodwill can result in lower product price: A dynamic analysis

This article analyses the price-quality and price-goodwill relationships under the influence of quality on goodwill through the effects of cost, sales, and mark-up. We identify the conditions under which a negative price-quality or price-goodwill relationship will arise, that is, price falls as quality or goodwill increases over time. We show that the price-quality or price-goodwill relationship could be negative even if the demand function is linearly additive, and this relationship will tend to be positive when the customer demand becomes more sensitive to the product quality.

Attributes influencing clothing store choice for an emerging market’s Generation Y Twixter customers

The aim of this paper was to determine the key attributes influencing a sub-segment of Generation Y, the Twixters’ choice of clothing retailers in South Africa, an emerging market. Generation Y has been identified as an important segment particularly for apparel and the Twixter sub-group comprises a third of the segment. Using a positioning theory lens, retailers need to understand the attributes a target market finds important as stores are positioned in consumers’ minds on those attributes. The study therefore sought to determine what these Twixters consider to be important attributes in their clothing store selection. The study comprised two stages; a qualitative stage based on focus group discussion data in which the attributes were determined, discussed and defined, and a quantitative stage, which involved a survey administered to 368 Twixter respondents which determined the relative importance of the attributes to Twixters in their clothing store selection. The results reveal that these Twixters appreciate the price–quality relationship and prefer clothing stores which provide high quality, unique and fashionable merchandise that meets their value for money requirements. The results of the study, although not generalisable, provide noteworthy insight for clothing store and apparel marketers targeting these Generation Y customers.

A hedonic price analysis of ski lift tickets in Norway

ABSTRACTIn this study, we used the hedonic price method to examine what affected one-day ski lift ticket prices in Norway in the winter season 2014/2015. The analysis was based on geographic information, supply-related characteristics and on climatic data of 83 alpine ski resorts. Additionally, we estimated which ski resorts were under- or overpriced. The results indicate that vertical drop, share of intermediate difficulty ski slopes, number of snow parks, travel distance to the nearest large ski resort in Sweden and price at the nearest ski resort in Norway positively affect prices. Travel distance to the nearest ski resort in Norway and to the nearest large urban area in Denmark or Sweden, a total lift capacity of less than 3000 persons per hour, location in western Norway and a location close to more than two other ski resorts significantly and negatively affect prices. The results suggest that, according to a price–quality relationship, the Hemsedal ski resort provided the highest quality of skiing experience. Overall, ski lift ticket prices were influenced by the pricing decisions of leading ski resorts in Norway. Managers can use the results of this study to make better pricing decisions to increase the profitability of their ski resorts.

Better Product Quality May Lead to Lower Product Price

AbstractThis article analyzes the conditions under which better product quality implies higher or lower product price. In an optimal control framework, I make the following assumptions: The firm sets the dynamic pricing and product innovation policies; product innovation raises quality, which drives production cost, and consumers are sensitive to price and quality. I derive a rule of price-quality relationship that stresses the influence of quality on price through the effects of cost (positive), sales (negative), and markup (positive). This article shows that, while maximizing profit and despite a quality and cost increases, the firm may decrease product prices because of the possibility of generating more sales as a result of combining better quality with lower price. This sales effect solves the puzzle of a negative price-quality relationship. More generally, the sales effect mitigates the ability of price to convey information about quality.