Abstract:

Decades of research have established that price is one important extrinsic clue to judge the quality of product. The price-quality effect refers to the tendency to use clues such as price to judge product quality, which is one of the main findings in the marketing literature. However, previous studies also showed that price, as an extrinsic clue, was not always a good indicator of product. It is largely affected by individual’s subjective psychological state, such as attitudes, emotions and values. Though branch of studies explored the key role of price-quality effect in consumption psychology and consumption behavior, the answer to the question of why price quality effect occur is still not clear enough.

There are several theories that can explain the price-quality effect, including selective information processing theory, reference-dependent model, and assimilation-contrast theory. The selective information processing theory states that the evidential bases for judgments are often scattered and complex. Consumers often simplify the judgment evaluation process by focusing selectively on the hypothesis-consistent evidence while neglecting the hypothesis-inconsistent evidence. The reference-dependent model demonstrated how people trade-off between satisfaction and expectation during the consumption. Assimilation/contrast explains this phenomena from the perspective of consuming experiences. Meanwhile, there are also a large number of studies have examined the neural mechanisms in the judgment of price-quality effect. However, these studies mainly focused on eating behavior which the external validity needs to be further verified.

Meanwhile, the price-quality effect was moderated by several factors, such as product characteristics, individual differences, group and social-culture contexts. Generally speaking, consumers are more easily judge the quality from its price of luxury product than common ones. Also, there are many individual differences moderated the relationship between price and quality, such as emotion, construct level, familiarity of product and need for closure. The relationship also moderated by interpersonal factors such as interpersonal relationship, group identity and group norms. The relationship of price and quality also varied by different culture. These moderators also have interactive effects on price-quality effect.

Although the current research have made fruitful results focused on the price-quality effect, the future studies still should pay attention to the following issues. Firstly, we suggested that the future study should pay more attention to the dynamic relationship between price and quality throughout the life cycle of the product. Every product has its life cycles and there are different relationships between price and quality in different cycles. Studies show that the price in judging the quality of product weights more in the start stage of a new product and weights less in the last stage. Secondly, it is promising to examine the price-quality effect from the perspective of the native cultures. In a “face culture” context, products also stand for individual’s ability and social status. From this perspective, Renqing, Guanxi and other native icons play important role in price-quality judgement. Thirdly, the different patterns of price-quality between online and offline should be taken into consideration as well. In offline consumption, due to the limitation of physical space, there is relatively little information for consumers to refer. Hence, price clues account for a large proportion in quality evaluation. However, there are more reference clues for online consumption behavior, which reducing the weight of price in quality evaluation. Finally, future research also needs to consider whether the relationship between price and quality is linear. When the price quality effect is used as the basis for business pricing, the sales amount may increase in the short term, but its follow-up effect should also be taken into account, which aimed to avoid the “one hammer trading”.

Key words: price-quality effect, selective information processing, reference-dependent model, assimilation/ contrast effect