Advertising, quality, and willingness-to-pay: Experimental examination of signaling theory
AbstractAccording to the quality signaling theory, firms are motivated to invest more advertising in high-quality products. This paper conducts an experiment through a closed-ended double-bounded dichotomous choice of the contingent valuation method to measure consumer willingness-to-pay for a fictitious cell phone market of varying quality before and after advertising. The results show that advertising effectively influences consumer awareness of perceived quality and enhance their WTP. The results also suggest that even though the high- and low-quality products differ in the investment of advertising, the effect of advertising on the increase in consumer WTP for low-quality products as well as for high-quality products.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Psychology.
Volume (Year): 33 (2012)
Issue (Month): 6 ()
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Web page: http://www.elsevier.com/locate/joep
Advertising effect; Quality; Willingness-to-pay; Contingent valuation method;
Find related papers by JEL classification:
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
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