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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

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    1. Pollak, Robert A, 1977. "Price Dependent Preferences," American Economic Review, American Economic Association, vol. 67(2), pages 64-75, March.
    2. Hjorth-Andersen, Chr., 1991. "Quality indicators : In theory and in fact," European Economic Review, Elsevier, vol. 35(8), pages 1491-1505, December.
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    7. 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.
    8. Alfredo Esposto, 1998. "Price, quality, and smoke signals," Applied Economics Letters, Taylor & Francis Journals, vol. 5(12), pages 801-803.
    9. Balasko, Yves, 2003. "Economies with price-dependent preferences," Journal of Economic Theory, Elsevier, vol. 109(2), pages 333-359, April.
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. repec:zbw:rwirep:0142 is not listed on IDEAS
    6. Paloyo, Alfredo R., 2009. "Co-pay and Feel Okay: Evidence of Illusory Health Gains from a Health Insurance Reform," Ruhr Economic Papers 142, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    7. Aditi Sengupta, 2016. "Green Premium, Ecolabel, and Environmental Damage," Auburn Economics Working Paper Series auwp2016-16, Department of Economics, Auburn University.

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    Keywords

    Demand and Price Analysis;

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