Price as a signal of product quality: some experimental evidence

Giovanni Mastrobuoni (), Franco Peracchi and Aleksey Tetenov ()

No 268, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: We use experimental data to disentangle signaling and budgetary effects of price on wine demand. The experimental design allow us to isolate in a simple and intuitive way the two effects. The signaling effect is present and nonlinear: it is strongly positive between EUR3 and EUR5, and undetectable between EUR5 and EUR8. We find a similar nonlinear price-quality relationship in a large sample of wine ratings from the same price segment, supporting the hypothesis that taster behavior in the experiment is consistent with rationally using prices as signals of quality. Price signals also have greater importance for inexperienced (young) consumers.

Keywords: Pricing; signaling; product quality; wine ratings (search for similar items in EconPapers)
JEL-codes: D11 D12 D82 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2012, Revised 2013
New Economics Papers: this item is included in nep-com, nep-exp and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Price as a Signal of Product Quality: Some Experimental Evidence* (2014)
Working Paper: Price as a signal of product quality: Some experimental evidence (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:268

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