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Does Price Signal Quality? Strategic Implications of Price as a Signal of Quality for the Case of Genetically Modified Food

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  • Hwang, Yun Jae
  • Roe, Brian E.
  • Teisl, Mario F.

Abstract

We add to the limited empirical literature on consumers' use of price as a quality signal by testing if the traditional downward-sloping consumption-price relationship fails to hold for GM products using data collected from a nationally representative mail survey featuring several hypothetical product choice scenarios. Statistical evidence is mixed across the three products investigated but suggests that survey respondents use price as a signal of the quality of GM products. Implications for firm strategy are discussed.

Suggested Citation

  • Hwang, Yun Jae & Roe, Brian E. & Teisl, Mario F., 2006. "Does Price Signal Quality? Strategic Implications of Price as a Signal of Quality for the Case of Genetically Modified Food," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 9(1), pages 1-22.
    • Handle: RePEc:ags:ifaamr:8209
    DOI: 10.22004/ag.econ.8209
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    References listed on IDEAS

    as
    1. Pollak, Robert A, 1977. "Price Dependent Preferences," American Economic Review, American Economic Association, vol. 67(2), pages 64-75, March.
    2. Jones, Philip & Hudson, John, 1996. "Signalling product quality: When is price relevant?," Journal of Economic Behavior & Organization, Elsevier, vol. 30(2), pages 257-266, August.
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    7. Stuart Landon & Constance E. Smith, 1998. "Quality Expectations, Reputation, and Price," Southern Economic Journal, John Wiley & Sons, vol. 64(3), pages 628-647, January.
    8. Caves, Richard E. & Greene, David P., 1996. "Brands' quality levels, prices, and advertising outlays: empirical evidence on signals and information costs," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 29-52.
    9. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
    10. Mark W. Nichols, 1998. "Advertising and Quality in the U.S. Market for Automobiles," Southern Economic Journal, John Wiley & Sons, vol. 64(4), pages 922-939, April.
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    Cited by:

    1. Sengupta, Aditi, 2012. "Investment in cleaner technology and signaling distortions in a market with green consumers," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 468-480.
    2. Alfredo R. Paloyo, 2009. "Co-pay and Feel Okay: Evidence of Illusory Health Gains from a Health Insurance Reform," SOEPpapers on Multidisciplinary Panel Data Research 225, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Alfredo R. Paloyo, 2009. "Co-pay and Feel Okay: Evidence of Illusory Health Gains from a Health Insurance Reform," Ruhr Economic Papers 0142, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    4. Aditi Sengupta, 2016. "Green Premium, Ecolabel, and Environmental Damage," Auburn Economics Working Paper Series auwp2016-16, Department of Economics, Auburn University.
    5. Aditi Sengupta, 2010. "Signaling environmental quality to green consumers and the incentive to invest in cleaner technology: Effect of environmental regulation," Departmental Working Papers 1001, Southern Methodist University, Department of Economics.
    6. repec:zbw:rwirep:0142 is not listed on IDEAS
    7. Sengupta, Aditi, 2015. "Competitive investment in clean technology and uninformed green consumers," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 125-141.

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    Keywords

    Demand and Price Analysis;

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