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This paper has three objectives. First, we develop an equilibrium pricing model in which consumers have incomplete information about both product qualities and prices…
This paper has three objectives. First, we develop an equilibrium pricing model in which consumers have incomplete information about both product qualities and prices. Specifically, manufacturers can use high prices to signal high quality to uninformed consumers. Furthermore, prices of any given brand can vary geographically across retail outlets. We show that previous models are special cases of our model. Specifically, the hedonic regression model assumes that consumers have full information about all product qualities and prices. Second, we propose a methodology for testing price‐signaling models. Third, we test our model using data from consumer reports for several consumer durable and nondurable products. The results show that firms use prices to signal quality, regardless of whether they market durable or nondurable products. The results do not support the popular theory that markets for experience goods are more efficient than those for search goods. Finally, our model outperforms the standard hedonic regression model for four of the five product categories analyzed.
The purpose of this study is to investigate how origin information for wine products influences retail sales. The growing variety of products and the generally singular…
The purpose of this study is to investigate how origin information for wine products influences retail sales. The growing variety of products and the generally singular origin of wine products makes this market particularly sensitive to origin information. The origin of wine is often perceived as an indicator of quality and is used as the basis of decision making when purchasing wine products. This study empirically tests a portion of Johansson's framework for the use of origin information through both a market survey and a field experiment to determine the predictive value on market position for a group of wine products from the Texas region. The results of the survey and the field experiment were consistent and found that emphasizing the origin of Texas wine significantly influenced retail sales. These results also indicate that special displays and increased retail shelf space do not always have a positive effect on sales of the displayed products. Therefore, it is important for retail managers to first identify whether the image of the wine's origin is perceived positively or negatively before using origin information in store displays.