TY - JOUR
T1 - Price as an Indicator of Quality
T2 - Implications for Utility and Demand Functions
AU - Ding, Min
AU - Ross, William T.
AU - Rao, Vithala R.
N1 - Funding Information:
The authors acknowledge constructive comments from Jehoshua Eliashberg, Ujwal Kayande, Arvind Rangaswamy, Richard Staelin, and participants at the 2003 ACR Toronto Conference. This research was partially supported by grants from the eBusiness Research Center and Smeal College of Business at Pennsylvania State University.
PY - 2010/3
Y1 - 2010/3
N2 - Consumers often infer quality information from prices and rely on their reference prices. This paper incorporates both behavioral regularities into the classic utility function. The analytical investigation reveals five qualitatively different types of consumers, three of which are relatively new to modeling literature. The authors test the model's theoretical insights using a new experimental method, random allocation of scarce inventories (RASI), which is designed to align people's incentives, such that they state their true rank order preferences. The results support the existence of five different types of consumers; the authors discuss the managerial implications for pricing strategies.
AB - Consumers often infer quality information from prices and rely on their reference prices. This paper incorporates both behavioral regularities into the classic utility function. The analytical investigation reveals five qualitatively different types of consumers, three of which are relatively new to modeling literature. The authors test the model's theoretical insights using a new experimental method, random allocation of scarce inventories (RASI), which is designed to align people's incentives, such that they state their true rank order preferences. The results support the existence of five different types of consumers; the authors discuss the managerial implications for pricing strategies.
UR - http://www.scopus.com/inward/record.url?scp=77949492085&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=77949492085&partnerID=8YFLogxK
U2 - 10.1016/j.jretai.2010.01.002
DO - 10.1016/j.jretai.2010.01.002
M3 - Article
AN - SCOPUS:77949492085
SN - 0022-4359
VL - 86
SP - 69
EP - 84
JO - Journal of Retailing
JF - Journal of Retailing
IS - 1
ER -