Cross-cultural Effects of Price on Perceived Product Quality.

It is generally agreed in the literature that price and the perceived quality of goods and services have a high, positive correlation. However, there is very little empirical evidence exploring this relationship, and the studies which have been done are limited to generalizing about the relationship within cultural boundaries. Buyers regularly face the task of estimating product quality under conditions of imperfect knowledge about the underlying attributes of the various product offers with the aid of personal, self-perceived quality criteria. The use of price as an indicator of quality is based on the theory that quality is a measure of the utility, or the want-satisfying capacity of products. Hence, the more quality a product possesses the more utility it contains, and the higher price it will obtain in an open market exchange. This leads to the deduction that similar products, offered to the market at different prices, contain different amounts of utility, and that there is a direct relationship between quality and price.