Theories of Value and Understanding of Price: a Developmental Perspective

Karen F.A. Fox, The University of Santa Clara
Trudy Kehret-Ward, University of California-Berkeley
ABSTRACT - Reasoning about the source of value reflected in particular prices develops in qualitatively different stages as a child matures. In early childhood the developing individual has a concept of price only in the sense that he knows a fixed amount must be paid; he cannot articulate a source of value. In middle childhood both costs and use emerge as sources of value, with the concept of relative scarcity emerging as middle childhood progresses. Increasing skill at coordinating the points of view of buyer and seller, as well as increasing knowledge about and experience with market transactions make for changes in the developing individual's understanding of how prices are determined: young children see pricing through the seller's eyes, older children see pricing decisions through the eyes of a seller who is keeping his eye on the consumer, and adults see pricing through the eyes of a seller who is keeping his eye on other sellers as well as on buyers.
[ to cite ]:
Karen F.A. Fox and Trudy Kehret-Ward (1985) ,"Theories of Value and Understanding of Price: a Developmental Perspective", in NA - Advances in Consumer Research Volume 12, eds. Elizabeth C. Hirschman and Moris B. Holbrook, Provo, UT : Association for Consumer Research, Pages: 79-84.

Advances in Consumer Research Volume 12, 1985      Pages 79-84


Karen F.A. Fox, The University of Santa Clara

Trudy Kehret-Ward, University of California-Berkeley


Reasoning about the source of value reflected in particular prices develops in qualitatively different stages as a child matures. In early childhood the developing individual has a concept of price only in the sense that he knows a fixed amount must be paid; he cannot articulate a source of value. In middle childhood both costs and use emerge as sources of value, with the concept of relative scarcity emerging as middle childhood progresses. Increasing skill at coordinating the points of view of buyer and seller, as well as increasing knowledge about and experience with market transactions make for changes in the developing individual's understanding of how prices are determined: young children see pricing through the seller's eyes, older children see pricing decisions through the eyes of a seller who is keeping his eye on the consumer, and adults see pricing through the eyes of a seller who is keeping his eye on other sellers as well as on buyers.


In his 1973 review of research on buyers' subjective perceptions of price, Monroe concluded that we know little about how price influences purchase behavior. Monroe consciously used the term "perception" to refer to the consumer's experience of price information, because price information in not merely registered: it is actively interpreted by the consumer, who judges prices to be "fair," "a bargain," and so on.

There is evidence that both external and internal variables affect price perceptions. External variables such as the reference price and the price range affect a consumer's ability to perceive two prices as the same or different (Emery 1970), and internal variables such as experience with the product class affect, for instance, the likelihood that a consumer will use price as a cue to quality (Lambert 1970, 1972).

Another internal, or organismic, variable which affects price perception is the individual's theory of value. A theory of value attempts to explain how prices work and answers two questions: (1) What is the source of value? and (2) What is the measure of value? For example labor is the source of value in a labor theory of value, and labor-time would be a corresponding measure of value.

Ideas concerning the source of value are partly positive and partly normative, in that they represent (1) an attempt to understand how the world works and (2) moral ideas in light of which long-run price levels will be Judged to have good or bat welfare implications. In economics, value theory began by focusing on factors of production such as land or labor (cost of production theories of value), and as value theory evolved, consumption factors were added. Although relative scarcity theory cakes both cost and consumption into account, differing convictions about where the source of value resides -- whether in a particular factor of production or in the efficient production of want satisfaction -remain at the heart of economists' arguments at whether particular prices are fair. So too with consumers, whose experience leads them to formulate more or less self-conscious personal theories of value, theories which affect their evaluations of price behavior.

The nature of consumers' theories of value should be of concern to marketers because these theories affect consumers' perception of price behavior in the marketplace During inflationary periods, people ask "What constitutes a fair price?," Who/what is responsible for price increases?" and "Should prices be regulated?" Consumers' (or voters') answers to these questions depend in large measure on their theory of value,i.e. on whether price is seen to reflect a return to some factor of production such as labor or capital, or whether it is seen to reflect patterns of consumer preference.

The same questions are asked when prices rise precipitously in a particular industry. An Opinion Research Center survey, taken in the period of rising gasoline prices following the 1973 oil embargo, fount that consumers thought oil companies made sixty cents per dollar of sales. Chevron prepared commercials informing the public that Chevron's profit per dollar was less than six cents, but when the commercials were pretested, over thirty percent of their sample did not believe the message (Winters 1977). Many consumers held that the oil crisis was itself fabricated by greedy corporations as a pretext for raising prices. Companies which understand consumers' notions of price would be better able to plan effective strategies to deal with misinformation and consumer hostility during times of rising prices

Formal instruction in economics would appear to shape consumers' notions about price. A major survey of knowledge of and attitudes coward the American economic system revealed that only formal college-level instruction in economics mate a difference in their factual knowledge (Compton Advertising 1975). But since few people have had formal instruction in economics, their notions of price apparently reflect their developmental experience (Fox 1978). Therefore we need to determine whether there are regularities in the experiences of developing individuals that make for qualitatively different theories of value at different ages.

Previous studies of the development of reasoning about price have largely ignored children's notions of the sources and measures of value as reflected in price. Instead previous studies have explored children's ability to recall and correctly estimate prices (Stephens and Moore 1975 examine adolescents' ability to estimate correct prices for specific products) and their conceptions of the relevant dimensions of value, i.e. what attributes of a product, if varied, are perceived to be correlated with price differences (Strauss 1952; Burris 1976; and Moschis & Churchill 1978)

The findings in these studies are consistent with what developmental psychologists have learned about which aspects of objects are salient to people at different developmental stages: gross perceptual attributes in early childhood, functional attributes in middle childhood, and contextual attributes -- including social meanings -- in adolescence. For 5-year olds, price is seen to vary with attributes such as size and number of pieces, by 9-year olds to vary also with quality, and for 13-year old; to vary also with social utility such as the popularity of a particular brand or style. Older subjects also mention aspects of the economic system itself, such as the retailer's need to replenish inventory, as relevant to pricing practices. Such responses reflect the maturing; individual's developing ability to think abstractly and to reflect consciously on the fact that value is not so much inherent in an object as it is the result of an object's position in a system that defines which dimensions count and which do not.

In Strauss's early study (1952) of the development of monetary meanings, early-childhood subjects offered more or larger coins for a larger candy. Middle-childhood subjects offered "worth for worth" and the meaning of worth became increasingly heterogeneous. A developmental study of exchange by Burris (1976) observed a similar progression, noting that the concept of worth develops in two stages, a stage in which physical size is the determinant attribute and a later stage in which function is the determinant attribute. Murray (1980) found that in adolescence social scarcity comes to be perceived as another determinant attribute of price.

Finally, Moschis and Churchill in their 1978 study of consumer socialization took a particular dimension of worth, namely quality, and looked at the extent to which adolescents agree that price reflects quality. They observed a deterioration of this belief as adolescence progresses This finding is consonant with Strauss's finding that older children are willing to entertain the idea that a seller may "overcharge.

All these studies assume a common source of value --namely a product's utility to the consumer -- and need to be complemented by studies of how other sources of value develop and how the maturing individual connects a particular source of value to a measure of value such as price.



In this section we discuss the various influences shaping a child's developing theory of value. These are 1) experience with buying and selling, 2) experience with taking the perspective of others, and 3) experience reasoning about moral questions.

Experience with buying and selling. We expected that conceptions of the source and measure of value would incorporate the child's knowledge and experience with buying and selling. Young children want things to use and know that these thing are purchased in stores, but since their experience of shopping is vicarious at best (they accompany their parents on shopping trips), the use-value of goods is likely to be more salient than other aspects of Roods such as manufacturing cost or relative scarcity.

As they get older, children have money of their own to spend and so acquire first-hand experience with the process of evaluating alternative choices. If their spending money is limited, the process of making trade-offs could lead to a relative-scarcity theory of value.

They may also acquire experiences which suggest the idea of labor or material inputs as a source of value. Such experiences could include making some of the things they use (e.g. cooking, sewing, and building models or other toys) and earning money through selling their labor.

Which of these sources of value -- use, material or labor inputs, or relative scarcity -- is salient to a particular child may depend on the child's experience, and to the extend that we are able to observe a developmental pattern in reasoning about the source of value underlying price, that pattern may be attributed at least in part to regularities in the kind of experience children of different ages have with the roles of buyer and seller.

Perspective taking. We also expected children's theories of value to reflect their developing skill in social cognition -- in particular their skill in social perspective taking (the ability to take the point of view of other actors in an exchange). There are three principal stages in the development of social perspective taking skill (Shantz 1975):

* At Stage 1, the developing individual is aware that others are, like him, active information processors, but that their responses/thoughts may be different from his own. He can engage in simple refocusing of perspective, shifting from his own to another's perspective, and as he acquires information about others is able to conjecture about the content as well as the separateness of the other's thoughts. This ability usually emerges around 6 years of age, although for other persons well known to the child, nonegocentric perspective taking has been demonstrated by children as young as 4.

* At stage 2 the child becomes aware that just as he can think about what others are thinking, so his own thoughts may be the object of others' thoughts. This awareness that people can act with one another's thoughts in view makes possible the ability to coordinate the perspectives of self and others sequentially, an ability that usually appears around 8 or 9 years of age.

* At stage 3, the developing individual acquires the ability to step outside the self-other dyad and coordinate the perspectives of actors simultaneously. This achievement appears some time after the age of 10.

If we substitute the buyer and seller for self and other, it is reasonable to think that the story the developing individual tells about how the seller determines price will be influenced by his/her perspective taking ability.

Moral reasoning. Even 5-year olds know that paying for goods is a morally approved means of acquiring property in them. However a variety of stories can be told about why one ought to pay (rather than for example just taking what one wants). Such accounts are examples of moral reasoning, and might be expected to parallel the observed developmental stages for reasoning about moral dilemmas.

Kolhberg (1969) has identified 6 stages in the development of moral reasoning, of which the first four are described below.

* At stage 1 of moral reasoning, the developing individual justifies the observation of rules for social interaction by appealing to authority and the consequences of disobedience.

* At stage 2 of moral reasoning, observation of social rules is justified on pragmatic grounds -- that doing so has good consequences for the individual. Reciprocal exchange -- the idea that if you conform to a social contract the other party will also -- is a frequently cited example of stare 2 moral pragmatism.

* At stage 3 moral behavior is justified because it makes one feel good about oneself.

* At stage 4 individual adherence to social norms is justified because it leads to good outcomes not just for the individual but for society as a whole.

Pilot Study

We conducted a pilot study in order to see how children's experiences of buying and selling combine with their developing skill in reasoning about social behavior to create a conception of the kind of value underlying price. For our pilot study we used a cross-section of subjects aged 4 (nursery school), 5, and 9. These ages were chosen because children of these ages seem to reason differently on a variety of tasks. [It has become customary to use age as a proxy for stage of cognitive development as defined by Piaget, even in studies which make no attempt to assess developmental stage using Piagetian reasoning tasks. See, for example, Capon and Kuhn 1980 who studied children aged 5, 9 and 13 because these ages "coincide" with Piaget's preoperational, concrete operational, and early formal operational stages of reasoning. Using age as a proxy for stage means greater variation in performance on tasks presumed to be mediated by stage of cognitive development.] Children were asked to talk about their shopping experiences, and were then asked the following questions:

1) When you go shopping, how do you decide what to buy? (Question 1 was asked to ascertain what aspects of goods are salient sources of value when the child looks at them from his own perspective.)

2) Who decides what the price of something will be? (This to identify the actor whose theory of value is at the center of the child's theory of price.)

3) How does that person decide what the price will be? (This to ascertain the child's ability to articulate a source and measure of value).

4) Why do we have to give money when we buy things in a store? (This to ascertain the child's ability to coordinate the point of view of buyer and seller and assess the child's ideas about the moral aspects of exchange.)

Answers were probed using prompts such as "Anything else?' and "Can you tell me a little more about that?"

Results of the Pilot Study

The pilot study suggested 3 levels in the development of children's reasoning about price, with the third level having two sub-levels.

Level 0: Nursers School. At this level children are unable to articulate a theory of value. Their description of what happens on a shopping trip does not include the idea of price. Children explain that the reason you give the seller money is so that he can give you back some. Giving money is seen as part-of a ritual, not part of an exchange, and children do not have the idea of a price -i.e. of a fixed amount that must be given.

Level 1: Age 5. In early childhood, the individual has an operational theory of value in the sense that he knows and can describe the properties that make him want to buy something ("It tastes gooder" or "It's prettier"), and he also knows that prices are fixed and that they vary with certain properties of objects (e.g. size). He can shift perspective (think like someone else) to the extent of postulating that the seller must have a source of value in mind when he decides on the price, and he knows that when the seller looks at a product, he may have different thinE in mint than he himself does when he is deciding whether to buy it. However his limited knowledge about the seller means he can neither explain why the seller uses certain properties in determining price nor tell a story about price that coordinates the seller's sense of the source of value with his objectives as a buyer.

Although the young child seems to have an operational measure of value (he knows that the price is usually marked on the product), his ability to articulate the source of value which the seller uses is limited to asserting that the seller "can just tell" how much a thing is worth by inspecting it (and apparently by noting such features as its size). This does not mean that he thinks of the perceptible useful properties of the object as constituting the seller's source of value. Unlike the somewhat older child, who defends the practice of paying for goods in terms of the fairness of giving something in exchange for an object's use, the level l reasoner will defend the practice of paying by pointing out the consequences of not paying ("It would be stealing, and then the police will end you to jail"). Appeal to authority/fear of punishment represents Stage 1 of Kolhberg's hierarchy of moral reasoning. Moreover, when asked why, for instance, a bigger candy bar might cost more, instead of appealing to its use value ("Because it lasts longer") his answer is tautological: "Because they want more money for the bigger thing and just a little for the littler things."

In sum, the child reasoning at level 1 cannot articulate the theory of value that the seller uses, but the theory that can be inferred from the behavior he describes has authority itself as the source of value and the numbers on the price sticker as the measure of value.

Level 2A: age 9. By middle childhood, the developing individual is able not only to take the perspective of each actor in a dyad, but to imagine each actor taking the perspective of the other. His knowledge that individuals can take account of one another's thoughts enables him to coordinate the perspectives of actors sequentially, shifting from the perspective of one to another in a way that makes a coherent story (Feffer 1959). This enables him/her to tell a story about price which coordinates the motives of buyer and seller.

His ability to take the point of view of the seller leads him to attribute a motive to the seller: the desire to make money to feet his family. The seller realizes he can make a living by selling things because he (the seller) can take the perspective of the buyer: he knows that buyers want to acquire the use of goods and that they are willing to pay to get them. Price is determined by the seller's focus on his site of the exchange process, namely his costs in acquiring the product or the qualities of the product as he perceives them.

To the extent that price is seen to vary with attributes of the product, there might seem to be inchoate elements of demand: the use-value of a product implies a user, but the buyer's utility is not mentioned at Level 2A. Use value is said to be determined by the seller consulting his own sense of quality: "He checks the items over and sees how much he thinks they're worth." You have to pay for goods because "the seller needs money to buy food and if he just gave things away free he's losing something and not getting anything in return." In other words, the child attributes to the seller a "value for value" theory of price. Such an idea of reciprocal exchange is consistent with Kolhbert's Stage 2 of moral reasoning.

In sum, when the Level 2A reasoner attempts to identify the source of value relevant to the determination of prices, he cites either attributes of the good (use value) or costs (labor and other manufacturing inputs), or both. The corresponding measure of value is, in the case of use value, price in the sense of the $ value of the use, and in the case of cost, the $ value of manufacturing inputs.

Level 2B: Age 9. As he progresses through middle childhood, the developing individual becomes adept enough at the regress of perspective taking to realize that the seller realizes that his (the buyer's) thoughts about value are relevant to his (the seller's) pricing behavior. At this level of reasoning, particular prices are attributed to the seller's placing the buyer's perspective at the center of his pricing strategy: in determining price "he ' d have to think the buyer's way." He may cut prices in order to attract the price-sensitive buyer, or he may try to raise prices via marketing strategies which augment the buyer's perceived use value ("If they --sellers -put a commercial on television, they think they'll probably make more than if they don't have a TV commercial because people watch TV"). The reason for paying is the same as at Level 2A: You have to pay because that's the way the seller earns money.

For the child at this level the source of value is cost and either seller-augmented use or relative scarcity: the price conscious buyer postulated by the Level 2B reasoner is aware of relative scarcity. The measure of value is the $ cost of manufacture and any associated marketing augmentation, or in the case of relative scarcity, price in the sense of market equilibrium.



We hypothesized that age and its associated increments of experience and social skill accounted for the qualitative differences between the identified levels of reasoning about price. It is of course possible that some aspects of the stories told by our subjects could be attributed to their being members of different school cohorts. For instance, what we are calling Level 2 thinking about price could have been already present in our 9-year olds when they were of kindergarten age as a consequence of a particular method of economics instruction -- say an experience-based curriculum such as Kourilsky's Kinder-Economy, which combines substantive content with economic role-playing (see Kourilsky 1977). If this were the case the observed differences would be attributable to cohort rather than to age. To control for the effects of cohort, we chose one of Baltes' (1968) sequential designs which allows for the simultaneous analysis of cohort and age effects. We chose a cross-sectional sequential design because it permitted us to complete our data collection in four y s, whereas a longitudinal-sequential design would have required us to collect data over an 8-year period. [An additional confounding factor in developmental studies such as ours with a longitudinal component may be time of testing. Some researchers (Baltes 1968) have argued that time of testing is a third variable to be controlled for, and captures changes in the larger socioeconomic environment. Others (Buss 1973, Wohlwill 1970) point out that differences attributable to cohort are defined in terms of cohort-specific changes in environment and culture; this means that environmental effects are necessarily confounded with cohort effects and ought not to be considered a third independent variable to age and cohort. The other source of time-of-measurement variation is temporary variations in the testing situation; this is a research design issue, not a construct issue.]

We interviewed five-and 9-year olds at two different times: in 1976 and four years later in 1980-81. The 5-year olds interviewed in 1976-66 (1971 birth cohort) were interviewed again in 1980-81, when they were nine, while the 9-year olds interviewed in 1976 (1967 birth cohort) were interviewed only once, as were the 5-year olds interviewed in 1981. Children of nursery-school age were not interviewed in this study. A total of 42 child subjects were interviewed, 17 of whom were interviewed twice.



In addition, twelve adults -- parents of children in the cohort to be interviewed twice -- were interviewed to permit comparison of children's responses with those of adults.


All subjects were residents of a stable upper-middle-class suburb on Chicago's North Shore. Between the first and second times of interviewing. only one subject moved away.


Subjects were interviewed individually at the school they were attending. Interviews were tape recorded for later transcription and scoring. Subjects were asked to talk about their shopping experience, and were then asked the same four questions put to the children in the pilot study. Parents were interviewed by telephone.


Interviews were scored in accordance with a scoring manual developed during pilot testing. Each child's level score represents the highest level at which he/she responded. Interviews were scored by two independent readers, and the interscorer reliability was 93%. Cohen's kappa, which corrects for chance agreement, was 82%.

Results: Child Study

Interviews scored in terms of the reasoning levels identified in our pilot study revealed qualitative differences in reasoning (see Table below) attributable, as predicted, to age. All the Level 0 and 1 reasoners were 5 years of age, and only 2 (7%) of the Level 2 reasoners were under 9. No cohort effect was observed for reasoning at levels 1 and 2. Whereas the average cohort difference in percent of 5 and 9-year olds reasoning at level 2 was not significant, the longitudinal change for the 1971 birth cohort was 100%, and is significant when tested with a repeated measures Procedure.

Since specifying age and cohort determines time of testing, the confounding of the latter with the former measures means we cannot simultaneously analyze the effect of time of testing. For anyone interested in reanalyzing our data with time of testing as one of the variables considered, we will point out that the kindergartners tested in the 1980-81 school year were tested at the end of the school year, while those tested in 1976-77 were tested at the beginning of the school year. So to the extent that school experience is a factor in maturing reasoning about price, the 5-year olds tested in 1976-77 had only a month of school experience beyond nursery school, a fact that may account for the 29% still reasoning at Level 0.



These results provide empirical validation for the sequentiality of the reasoning levels postulated on the base of the pilot study. We have used the term "levels," as opposed to the term "stages," to describe the qualitatively different kinds of reasoning observed because cognitive developmentalists reserve the term "stage" for multifaceted global changes in the structure of thinking across tasks and conceptual domains. Since we in fact discovered the hypothesized parallelism between reasoning about moral dilemmas (the two interview techniques yield reasoning that follows roughly parallel age trends), this provides evidence for convergent validity and a type of validation for the assumption of structured wholeness in the development of social cognition.

Results: Adult Study

Whereas the majority of 9-year olds tested were reasoning at Level 2A, focusing on the seller's side in explaining price, only 33% of the parents were reasoning at that level. Most of the adults interviewed took the buyer into account in their explanation of how prices are determined, although their reasoning was qualitatively different from what we have identified as Level 2B reasoning. It seems to be the case that reasoning about price, like other kinds of social reasoning, continues to mature throughout adolescence and into adulthood. The pattern of reasoning we observed in the adults in our sample suggests a third level of reasoning about price:

Level 3A: Adulthood. In adulthood no new source of value is added to those adumbrated in middle childhood (use value, costs, and relative scarcity). The mature thinker elaborates the story he told in middle childhood by multiplying uses and costs: the idea of display utility is added to other kinds of usefulness (relative social scarcity becomes a source of use value), and costs now include the costs of retailing, paying business taxes, and so on.

These elaborations do not in themselves make for a theory of price qualitatively different from the one held in middle childhood. What does make for a structurally different theory is the maturing individual's ability to step outside the buyer-seller dyad of which he is a part and coordinate perspectives simultaneously (rather than just sequentially), and to put himself in the place of other actors doing the same. He reasons that the existence of many buyers and sellers all playing the same game with the same ability to understand one another's motives means that the behavior of an individual buyer-seller dyad is constrained by the behavior of other buyer-seller dyads, and talks not only about individual buyers and sellers but about aggregates of sellers called "competitors" and about aggregate buyer-seller behaviors called "demand" and "supply."

The Level 3 reasoner believes that the seller determines price, but that he does so "by looking at the quality of competitors' products and what they are charging." The source of value is use value for the individual focusing on comparative quality and relative scarcity for the individual focusing on price, and the associated measures of value are $/increment of quality,ant where relative scarcity is the source of value, price. The Level 3 reasoner justifies the pricing system in terms of its ability to lead to good welfare outcomes for all its members: "If the necessity of paying were abolished overnight, some people would go into the stores and take everything and others wouldn't have anything,ant the seller would have no incentive to provide more goods." (This is an example of Kohlberg's Stage 4 of moral reasoning. [Kohlberg's Stage 3 (in which conformity to norms is justified because it makes one feel good about oneself) seems not to appear in reasoning about price -- perhaps because the acknowledged self interest of buyer and seller precludes it.])

Level 3B: Adulthood. At Level 3B the individual no longer believes that the seller determines prices by consulting his own objectives while keeping a wary eye on buyers. When asked "Who determines prices?" he says "I don't know that any ONE PERSON determines prices: competition determines price levels." Where the Level 3A reasoner is standing outside his own dyad and looking at the aggregate behavior of groups of buyers and sellers, the Level 3B reasoner is standing outside the groups and looking at the pricing system as a whole For the Level 3B reasoner the source of value is relative scarcity and the measure of value is price.

Of the twelve adults interviewed, 4 (33%) were reasoning at Level 2A, 2 (17%) were reasoning at Level 2B, 4 (33%) were reasoning at Level 3A, and 2 (17%) were reasoning at Level 3B.


One question we have not addressed so far is whether later-developing levels of reasoning about price are in some sense "higher" than earlier levels -- either in terms of their conceptual completeness or in that they represent a closer approximation to approved norms of socio-economic chinking.

Conceptual complexity of levels. Let us begin with the question of whether lacer-developing levels represent "higher" levels of concept development. It is clear that the story told at each level is more complete than the accounts given at earlier levels. For example, at Level O the child observes money change hands, but has no understanding that the buyer must profer a certain amount; at Level 1 he/she knows the amount is fixed in advance, but cannot say how; at Level 2A a theory of price is elaborated based on the seller's knowledge of his costs and his product, and at level 2B that theory is elaborated to include the seller's knowledge of the buyer. On the other hand, there is no elaboration of the source of value after Level 2: although explicit sources of value do not emerge until Level 2, by the end of middle childhood, the list is complete: use-value, cost, and relative scarcity).

There is nothing in our model to suggest that individuals whose theory of value is based on cost as the source of value are reasoning at a higher level than individuals whose theory of value is based on use as the source of value or vice versa. Later developing levels differ only in the number of actors in the story (a manufacturer and various middlemen are added to the buyer-seller dyad) and in the amount of information actors are assumed to have about one another's motives and behavior.

The importance of information about other actors in Level 2 and Level 3 reasoning does mean that individuals reasoning at these levels are not simply better acquainted with markets than those reasoning at level 1. At level 2 the additional actors are linked by a regress of perspective taking: the child imagines the seller thinking about the wholesaler thinking about the manufacturer thinking about his suppliers, and the buyer and seller are linked in one- and two-loop recursive perspective taking: the child thinks about the seller thinking about him (the buyer) thinking about the fairness of his (the seller's) prices.

To the extent that 5-year olds are not capable of this kind of thinking, levels 2 and 3 do in fact represent higher kinds of reasoning. One implication is that educational programs designed to teach children the idea of relative scarcity, or to make them more value or quality-conscious consumers will not necessarily endow them with a higher level of reasoning about price. Such programs, if they are deemed desirable, should also provide experience in taking the role of buyer and seller and, when a buyer, thinking what the seller is thinking, and vice versa.

Buyer Attitudes toward the Pricing System. In thinking about the desirability of facilitating a child's movement up through the several levels of reasoning about price, we might begin by asking whether someone reasoning at higher levels is better able to judge whether a particular price is "fair" than someone reasoning at lower levels. Someone reasoning at Level 2 or Level 1 is clearly incapable of judging whether particular prices are fair. . At higher levels buyers can make judgments of fairness, but those judgments depend at least in part upon the buyer's beliefs about the source of value. For example, a good seamstress might decline to buy a dress on the basis that its price was far in excess of the labor it would take to make (cost is her source of value), whereas someone for whom use is the source of value might consider the same dress a bargain at any price. Alternatively, someone whose source of value is cost might find it hard to pass up any item offered "at cost" regardless of its usefulness. Finally, someone whose source of value is relative scarcity will judge fairness by comparing prices at a given quality level.

Our model does not distinguish between explanations of price in terms of source of value beyond Level 2B. This means that knowing an individual's level of reasoning about price does not provide information about the criterion used in determining the fairness of a particular price.

With respect to attitudes toward price levels in general however, it is clear that the individual reasoning at Levels 28 and 3 is more likely than individuals reasoning at lower levels to entertain the possibility that prices may be more or less divorced from costs, and that they may have their basis in attempts to manipulate either the buyer or the market, in order to alter the nature of demand or the structure of competition. This view of price as a tool of the seller may make the individual who holds it a more careful and self reliant shopper, or it may simply make him/her a more suspicious and dissatisfied one. It would be interesting to correlate levels of reasoning about price with general and particular attitudes toward business. It may be that Level 2B and 3A reasoning is correlated with negative attitudes but not Level 3B, since at Level 3B the individual seller is no longer seen as the source of price determinations. Alternatively, at Level 3B we may see dissatisfaction not with particular prices or sellers but with the pricing system :self as a mechanism for economic decision-making.

Our results suggest that some children are already prepared to turn a jaundiced eye on pricing practices by the end of middle childhood. To be sure, our subjects came from an upper-middle class neighborhood; children from less affluent families may arrive at Level 2B reasoning later (Enright, Enright, Manheim, and Harris 1980 found that children of lower socioeconomic status lag behind higher status children in reasoning about distributive justice). Alternatively, children from lower middle class homes may have direct early experience of scarcity that may make the idea of relative scarcity salient at an earlier age: in our study relative scarcity was not mentioned as a source of value until Level 2B, and it might appear earlier among lower middle class children. To be sure, our model suggests that experience is necessary but not sufficient to effect changes in reasoning about price: perspective-taking skill also plays a role. This means asking how socioeconomic status affects opportunities for enacting various roles, or alternatively, how it affects the propensity of parents to articulate for the child the thoughts and feelings of others.


"It may be tempting," Ward said in his 1974 review of the consumer socialization literature, "simply to identify age-related differences in . .-. how accurate (children) are in pricing consumer goods and services . .. (but) it may be most fruitful to focus on the Processes (by which price is evaluated)." It may, in other words, be less important to understand price consciousness(in the sense of the ability to recall price information) than to understand children's sense of how price coordinates the seller's source of value with their own objectives as consumers. He have described qualitatively different stages in reasoning about how prices are determined. Further research is needed to establish the relationship between these reasoning levels and attitudes toward the pricing system itself.


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