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How do consumers use signals to assess quality?

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Author Info
Gergaud, Olivier
Livat, Florine
Abstract

This article analyzes the way some 6,000 European wine consumers, both connoisseurs and non-connoisseurs, use a set of available signals (price, umbrella branding, goodwill, past consumption) to assess the quality of Bordeaux wines where price is the main source of information on quality. Connoisseurs use this signal less intensively than on connoisseurs. Price represents a substitute for umbrella branding where consumers are not aware of who is beneath this umbrella, and where this signal is thus of no help to them. This could explain why such wines tend nowadays to lose market share in favor of branded wines that are easier to evaluate.

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Paper provided by American Association of Wine Economists in its series Working Papers with number 37296.

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Date of creation: Apr 2007
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Handle: RePEc:ags:aawewp:37296

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Web page: http://www.wine-economics.org
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Related research
Keywords: wine quality; information; quality signaling; wine market; Consumer/Household Economics; Demand and Price Analysis; Industrial Organization; Marketing;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Erevelles, Sunil & Roy, Abhik & Yip, Leslie S. C., 2001. "The universality of the signal theory for products and services," Journal of Business Research, Elsevier, vol. 52(2), pages 175-187, May. [Downloadable!] (restricted)
  2. Brucks, Merrie, 1985. " The Effects of Product Class Knowledge on Information Search Behavior," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 12(1), pages 1-16, June.
  3. Montgomery, Cynthia A & Wernerfelt, Birger, 1992. "Risk Reduction and Umbrella Branding," Journal of Business, University of Chicago Press, vol. 65(1), pages 31-50, January. [Downloadable!] (restricted)
  4. Rao, Akshay R & Monroe, Kent B, 1988. " The Moderating Effect of Prior Knowledge on Cue Utilization in Product Evaluations," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 15(2), pages 253-64, September.
  5. Ippolito, Pauline M, 1990. "Bonding and Nonbonding Signals of Product Quality," Journal of Business, University of Chicago Press, vol. 63(1), pages 41-60, January. [Downloadable!] (restricted)
  6. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August. [Downloadable!] (restricted)
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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. [Downloadable!] (restricted)
  8. Cabral, L.M.B., 2000. "Stretching Firm and Brand Reputation," New York University, Leonard N. Stern School Finance Department Working Paper Seires 00-07, New York University, Leonard N. Stern School of Business-.
    Other versions:
  9. Birger Wernerfelt, 1988. "Umbrella Branding as a Signal of New Product Quality: An Example of Signalling by Posting a Bond," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 458-466, Autumn. [Downloadable!] (restricted)
  10. Kirmani, Amna, 1990. " The Effect of Perceived Advertising Costs on Brand Perceptions," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 17(2), pages 160-71, September.
  11. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug.. [Downloadable!] (restricted)
  12. Thomas, Louis & Shane, Scott & Weigelt, Keith, 1998. "An empirical examination of advertising as a signal of product quality," Journal of Economic Behavior & Organization, Elsevier, vol. 37(4), pages 415-430, December. [Downloadable!] (restricted)
  13. Bettman, James R & Park, C Whan, 1980. " Effects of Prior Knowledge and Experience and Phase of the Choice Process on Consumer Decision Processes: A Protocol Analysis," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 7(3), pages 234-48, December.
  14. Johnson, Eric J & Russo, J Edward, 1984. " Product Familiarity and Learning New Information," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 11(1), pages 542-50, June.
  15. 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. [Downloadable!] (restricted)
  16. Olivier Gergaud & Florine Livat, 2004. "Team versus individual reputations : a model of interaction and some empirical evidence," Cahiers de la Maison des Sciences Economiques bla04015, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
  17. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August. [Downloadable!] (restricted)
  18. Jason A. Winfree & Jill J. McCluskey, 2005. "Collective Reputation and Quality," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 87(1), pages 206-213, 02. [Downloadable!] (restricted)
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  19. Gawande, Kishore, 1997. "Generated regressors in linear and nonlinear models," Economics Letters, Elsevier, vol. 54(2), pages 119-126, February. [Downloadable!] (restricted)
  20. Alba, Joseph W & Hutchinson, J Wesley, 1987. " Dimensions of Consumer Expertise," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 13(4), pages 411-54, March.
  21. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November. [Downloadable!] (restricted)
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  1. 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. [Downloadable!]
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