Price-Based Expectations

Ayelet Gneezy, University of California at San Diego, USA
Uri Gneezy, University of California at San Diego, USA
When quality is hard to evaluate, people often use price as a proxy, resulting in the “price-quality” heuristic. In a field experiment in a winery, the authors show that increasing the price of a high-quality wine, but not the low-quality one, may produce a significant increase in demand and profits, indicating an upward-sloping demand function.
[ to cite ]:
Ayelet Gneezy and Uri Gneezy (2011) ,"Price-Based Expectations", in NA - Advances in Consumer Research Volume 38, eds. Darren W. Dahl, Gita V. Johar, and Stijn M.J. van Osselaer, Duluth, MN : Association for Consumer Research.