A paradox of price-quality and market efficiency : A comparative study of the US and China markets

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)349-365
Journal / PublicationInternational Journal of Research in Marketing
Volume19
Issue number4
Publication statusPublished - Dec 2002
Externally publishedYes

Abstract

The price-quality schema rests on an assumption that price is credible information about product quality. However, the credibility of price information varies across different markets. In an inefficient market, consumers would believe in the price-quality relationship to a lesser extent because price information is less credible. Paradoxically, in such a market, sometimes consumers have to rely more on price to infer quality because other product information is less available. With a cross-national perspective, this study investigated the influences of market efficiency and consumer risk aversion on the price-quality schema between the China and the US markets. We found that due to the inefficient market environment, Chinese consumers possess a weaker price-quality schema than American consumers. Chinese consumers are more risk averse than their American counterparts. However, in China, risk-averse consumers are more likely to use price to infer product quality. Implications for global marketing are discussed, and directions for future research are suggested. © 2002 Elsevier Science B.V. All rights reserved.

Research Area(s)

  • China, Market efficiency, Measurement invariance, Price-quality schema, Risk aversion