Price Premium Variations as a Consequence of Buyers' Lack of Information

Akshay R. Rao · Mark Bergen

197 citations0/0 files storedJournal of Consumer Research

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Consumer Market Behavior and Pricing Customer Service Quality and Loyalty Consumer Behavior and Marketing Influence

Abstract

It appears that buyers sometimes knowingly pay a price that is higher than that justified by the relative quality of the product. Such a price premium is argued to be an economically rational attempt by quality-conscious buyers to ensure that the seller does not provide a lower than promised level of quality for experience products. Conversely, for search products, price premiums are argued to be the consequence of lack of search by buyers who are less quality conscious. Results from a survey conducted in an organizational buying setting indicate that buyers' tendency to pay a price premium for experience products increases with an increase in their quality consciousness, while for search products this tendency decreases with an increase in their quality consciousness. The implications of this finding are discussed; further analysis leads to additional speculation regarding some other mechanisms that buyers may use to assure product quality.

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References

1988Consumer Perceptions of Price, Quality, and Value: A Means-End Model and Synthesis of Evidence 1981The Economics of Organization: The Transaction Cost Approach 1981The Role of Market Forces in Assuring Contractual Performance 1983Premiums for High Quality Products as Returns to Reputations 1988The Role of Dependence Balancing in Safeguarding Transaction-Specific Assets in Conventional Channels 1989The Effect of Price, Brand Name, and Store Name on Buyers' Perceptions of Product Quality: An Integrative Review 1988The Moderating Effect of Prior Knowledge on Cue Utilization in Product Evaluations 1992Agency Relationships in Marketing: A Review of the Implications and Applications of Agency and Related Theories

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