correlates of price acceptability

Journal of Consumer Research, Inc.

Correlates of Price AcceptabilityAuthor(s): Donald R. Lichtenstein, Peter H. Bloch and William C. BlackSource: Journal of Consumer Research, Vol. 15, No. 2 (Sep., 1988), pp. 243-252Published by: The University of Chicago PressStable URL: http://www.jstor.org/stable/2489529 .

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Correlates of Price Acceptability

DONALD R. LICHTENSTEIN PETER H. BLOCH WILLIAM C. BLACK*

The cognitive tradeoff between price and product quality is used as a basis for hypothesizing interrelationships between two individual difference variables and two price-related responses. Results of a correlational study support the hypothesis of an inverse relationship between price consciousness and product involvement and the hypotheses that price consciousness and product involvement have opposite implications for several price-related constructs. Results also indicate a positive relationship between price acceptability level and the width of the latitude of price acceptance.

p rice perception, the process by which consumers translate prices into meaningful cognitions, has

interested researchers for several years. In conceptualizing this process, Jacoby and Olson (1977) employed a stimulus-organism-response (S-O-R) model. Ac- cording to this model, actual prices that consumers encounter represent the stimuli or cues activating the perception process. The organism component reflects the psychological processing of price cues and includes the acquisition, encoding, and storage of price information, as well as the development of an attitude toward price and the integration of price with other information. Outputs or responses of the process are overt consumer behaviors such as purchasing or not purchasing.

The encoding process is especially important in de- termining how prices are perceived, because it is at this stage that the consumer interprets and evaluates the price cue (Berkowitz and Walton 1980). Con- sumers exposed to the same price cue receive the same objective information (e.g., $49.95); however, each individual assigns unique meaning to the objective price while translating it to a perceived or psychological price. For example, because adaptation level prices vary across consumers, when consumers com- pare an objective price cue to an adaptation level

price, some may judge the price cue as "high" and others may judge the same price cue as "low." How- ever, the price cue is not necessarily too high or too low to be acceptable. Judgments of price acceptability involve a comparison with a range of acceptable prices stored in memory. Because these ranges are also person-specific, some consumers may have a wide acceptable price range for a product, but for other consumers, the range may be narrow. Hence, judgments of price acceptability for two consumers with identical adaptation level prices may lead to different outcomes because of differing price acceptability range widths. One consumer may judge a price as "acceptable-high," but another consumer with a narrower range of acceptable prices may judge the price as "unacceptable-high" (Jacoby and Olson 1977; Monroe 1973).

The different meanings a consumer may attribute to a price cue in the encoding process may not be in- dependent. By integrating the price cue with quality perceptions, some consumers may assign a meaning of "high quality" to the price cue, i.e., a price-quality inference. This meaning, in turn, may influence consumer price perceptions such that prices at higher levels are perceived as more acceptable. This article fo- cuses on individual differences that account for variation in the encoding of price, and hence price acceptability.

THE CONCEPT OF PRICE ACCEPTABILITY

Judgments of price acceptability are a key component in Jacoby and Olson's (1977) link between the psychological processes of the organism and overt responses such as purchase. The concept of price acceptability helps explain relationships among vari-

* Donald R. Lichtenstein is Assistant Professor of Marketing, College of Business Administration, University of Colorado, Boul- der, CO 80309. Peter H. Bloch is Associate Professor of Marketing, School of Management, University of Massachusetts, Amherst, MA 01003. William C. Black is Associate Professor of Marketing, College of Business Administration, Louisiana State University, Baton Rouge, LA 70803. The authors would like to thank William Bearden, Subhash Sharma, Robert Westbrook, and three anony- mous reviewers for their comments and contributions to the prepa- ration of this article. Research for this article was funded exclu- sively by Louisiana State University and was conducted when all three authors had faculty appointments there.

243 ? JOURNAL OF CONSUMER RESEARCH * Vol. 15 0 September 1988



244 THE JOURNAL OF CONSUMER RESEARCH

ables such as perceived quality, perceived value, and willingness to buy (Monroe 1984; Monroe and Krish- nan 1985).

Measures of price acceptability have generally involved consumers' evaluations of whether stated re- tail prices are true or fair prices (Zeithaml 1984). Although assessments of true and fair prices have implications for price acceptability (i.e., prices perceived to be true and fair are more likely to be acceptable), they do not fully capture the construct. Consumers may perceive that $600 for a VCR with stereo sound is a fair price, yet the price may be unacceptable because they do not need, or perhaps cannot afford, the stereo capabilities.

To broaden the understanding of price perception and price acceptability in particular, a new definition of price acceptability is offered:

Price acceptability is a judgment of price based on a comparison of the price cue to a range of acceptable prices stored in memory.

The term "range" in this definition is two-dimen- sional, encompassing a level and a width dimension. The prices consumers find acceptable are defined by the price levels they find acceptable and also the width of the latitude of acceptable prices. The price level represents a point of estimate of the general level of acceptable prices encompassed by the latitude of acceptable prices. The price level can thus be viewed as analogous to a central tendency in the distribution of acceptable prices, and price width represents the deviation of acceptable prices around the price level. Two different consumers may have latitudes of price acceptance centered about the same price level, yet the widths of the acceptance regions may vary signifi- cantly. Alternatively, two consumers may have identical price range widths with respect to the latitude of price acceptance, and consequently be open to accept the same deviation in prices, yet the prices may be at two very different levels. According to this two-di- mensional perspective, then, a price acceptability range (e.g., $40-$60) would be represented by a point estimate of the price level (e.g., a single price between $40 and $60), and also a width estimate based upon the difference between the upper and lower price acceptability limits (e.g., $20).

Distinguishing between level and width dimensions of price acceptability is important because the two dimensions have different implications for price acceptability, and also, certain variables are hypothesized to affect these dimensions differentially. Consequently, in this article, the terms "price acceptability level" and "width of the latitude of price acceptance" refer to each respective dimension individually. The general term "price acceptability" refers to both dimensions.

PRICE ACCEPTABILITY AND PSYCHOLOGICAL ANTECEDENTS Several individual difference variables have been

hypothesized to influence price encoding (cf. Jacoby and Olson 1977; Zeithaml 1987). In the present study, individual differences in price consciousness and product involvement and the effects of such differences on one price judgment, price acceptability, are of primary interest. These individual differences are hypothesized to influence price acceptability directly and indirectly, via their influence on the formation of price-quality inferences. In examining the effects of price consciousness and product involvement on price acceptability, this study em- phasizes psychological correlates of the price acceptability construct by bringing together two consumer research streams not previously linked: price perception and product involvement. It also specifically ad- dresses a need for research that explicitly links price consciousness and price perception (Monroe 1973).

Price-Quality Inferences Differences in consumers' propensity to make

price-quality inferences can explain, in part, interper- sonal variations in price acceptability levels. Per- ceived quality has been defined as the consumer's judgment about a product's overall excellence or su- periority (Zeithaml 1987). Consequently, to the degree buyers make price-quality inferences, they view price in a favorable light, believing that higher prices reflect better materials, finer workmanship, and so on. Because price plays a positive role for these consumers, they are more likely to find higher prices acceptable (John, Scott, and Bettman 1986). To the degree consumers do not make price-quality inferences, price is viewed as a negative element only, reflecting resources yielded. For these consumers, higher prices are seen as a costly resource outlay without compensating returns in product quality, making these consumers more likely to accept only prices at lower levels.

Price Consciousness and Product Involvement

To understand variation in price acceptability levels across consumers, one must examine variables un- derlying the propensity to view price in its positive versus negative role. Individual differences in involvement with what the consumer receives in a purchase transaction (product) versus what the consumer sacrifices (price) provide such insight.

A consumer more highly involved in the negative price element relative to the product element may be described as price conscious for the particular product class. Such consumers display a sensitivity for



PRICE ACCEPTABILITY 245

paying lower prices, and hence are more likely to view price in its negative role. Monroe and Petroshius (1981, p. 44) characterize a shopper as price conscious:

to the degree he/she is unwilling to pay a higher price for a product, and if the price is greater than what is acceptable to pay, the buyer may refrain from buying. Moreover, the price conscious shopper will not be willing to pay for distinguishing features of a product if the price difference for these features is too large.

This characterization implies a sensitivity to price differences, a concern for price as a criterion in decision-making, and also internal limits on what the consumer is willing to pay (Zeithaml 1984), all implications consistent with price in its negative role. Therefore, price consciousness may be defined by the degree to which the consumer uses price in its negative role as a decision-making criterion. By this definition, price consciousness is expected to be negatively related to price acceptability levels.

Monroe and Petroshius's (1981) characterization of the price conscious shopper also has implications for price-quality inferences. Price conscious consumers may not necessarily pay the lowest price available but tend to pay a lower price when the distinguishing features of more expensive alternatives cannot be jus- tified. In cases where price conscious consumers do accept higher prices, they are more likely to require explicit justification of returns in quality for increased dollar outlays and are less likely to be simply operating on an inference-based "higher price means higher quality" schema.

Whereas price consciousness reflects a concern with purchase outlays, product involvement pertains to a concern with what is received in a purchase transaction. For purposes here, product involvement refers to an enduring interest in or concern with a given product (see Bloch and Richins 1983; Zaichkowsky 1985). Product involvement should not be confused with the temporary purchase-dependent interest in a product that results from risk perceptions. That is, consumers may be involved in purchase decisions due to the high risks associated with poor choices, yet they may possess no general interest in the product class. Where enduring product involvement is high, consumers associate highly valued outcomes with product use, and they think about the product often (Bloch and Richins 1983). In such instances, consumers should be more concerned with the product relative to its price, and thus should have higher levels of price acceptability.

For a given purchase, the relative involvement in the price (in its negative role) versus the product con- stitutes a primary base from which price judgments are formed. Interrelationships of price consciousness, product involvement, price-quality inferences, and price acceptability are examined simultaneously via

tests of several hypotheses using a structural model- ing approach.

HYPOTHESES Hi: For consumers who believe that price and

product quality are positively related, the level of acceptable prices is higher than it is for consumers who do not believe such a relationship exists.

As consumers believe that spending more brings them greater quality in return, they should be willing to pay more for a product. Thus, the formation of price-quality inferences should be positively associated with price acceptability levels. Peterson and Wil- son (1985) and John et al. (1986), who found that price-quality inferences were associated with prefer- ences for higher priced goods, support this conclusion.

H2: For a given product class, price consciousness and product involvement are inversely related.

Price consciousness and product involvement are expected to vary across consumers, products, and situations. Regarding price consciousness, some consumers are consistently concerned with what must be given up in a purchase, and others exhibit considerable variability across product classes and even across time periods. A buyer may feel quite differently about purchasing a higher-priced brand of peas than about purchasing a higher-priced television (Monroe and Krishnan 1985). By definition, product involvement is also product-specific because only selected goods will elicit high, ongoing interest in a given consumer. Therefore, Hypothesis 2 only applies for a given product and situation rather than reflecting a negative link between two general traits.

Support for Hypothesis 2 is drawn from several sources. First, given that a purchase implies a trade of product for payment, consumers have difficulty in simultaneously serving an involvement in price and an involvement in the product. Product involvement implies a strong concern with a product and its poten- tial benefits. Since price consciousness reflects an un- willingness to pay extra for increased product benefits, involvement in a product is likely to conflict with price consciousness for that same product. Therefore, as the ratio of product involvement to price consciousness increases, consumers should be willing to sacrifice price advantages for product benefits, and vice versa.'

' It is reasonable to expect even highly product-involved consumers to seek product benefits at a competitive price. If identical product benefits can be obtained from less expensive brands or out- lets, there is no trade-off and even product involved consumers may be economical.




In support of this price/product trade-off, Peterson and Wilson (1985) contrasted price and product con- cerns in a discussion of perceived risk. They argued that buyers balance the risk that a good will not be worth its price with the risk that product performance will not meet quality demands. The first risk type is allied with price consciousness and the latter is influ- enced by product involvement. Etgar and Malhotra (1981) also found that as product characteristics be- come more important, price becomes less salient.

H3: Price consciousness in a product class is inversely related to price-quality inferences and price acceptability levels.

H4: Involvement in a product class is positively related to price-quality inferences (when product knowledge is taken into account) and price acceptability levels.

Because price consciousness is defined as the degree to which a consumer uses price in its negative role as a decision-making criterion, Hypothesis 3 posits that price consciousness is negatively related to price acceptability levels. A corollary of the use of price in its negative role is that as price consciousness in a product class increases, consumers are more likely to believe that low-priced brands and high-priced brands in that product class do not vary enough to justify the observed differences in price. Because price conscious consumers have lower levels of price acceptability, they are less likely to believe that by paying higher prices, they will receive compensating returns in product quality. Therefore, price consciousness in a product class is hypothesized to be negatively related to price-quality inferences.

Regarding Hypothesis 4, product involvement reflects a concern with product benefits and a willingness to pay for them. Thus, involvement with a product is expected to be positively related to price acceptability levels for that product (Bloch, Sherrell, and Ridgway 1986). However, the relationship between product involvement and price-quality inferences noted in Hypothesis 4 is somewhat more complex. People who are highly involved in a product associate important functional, social, and psychological outcomes with the product. Therefore, highly involved consumers care about product quality and make relatively fine quality discriminations among alternatives. This conclusion is based on the premise that involvement in a product increases perceptual accentu- ation for attributes pertaining to that product (Zaichkowsky 1985).

Although Peterson and Wilson (1985) note that recognition of quality differences is a minimum re- quirement for price-quality inferences, product involvement is expected to encourage such inferences only when product knowledge is low. As suggested by a number of researchers, knowledgeable consumers

are less likely to make price-quality inferences because they can make a choice based on objective quality indicators rather than price (Peterson and Wilson 1985; Zeithaml 1987). Product involvement has been found to be associated with product knowledge due to high levels of interest and information seeking (Bloch et al. 1986). When isolated from product knowledge, however, involvement is expected to elicit price-quality inferences because consumers strongly care about quality but cannot recognize differences in objective quality across alternatives. In such cases, consumers make quality discriminations and use price as the best available indicator of quality (Monroe 1973).

H5: Price consciousness negatively affects the width of the latitude of acceptable prices.

The use of latitudes of acceptance comes from earlier work in Social Judgment Theory (Sherif, Sherif, and Nebergall 1965). According to this theory, involvement with a stimulus is associated with narrower latitudes of acceptance for message positions regarding that stimulus. As used here, price consciousness reflects involvement with price in its negative role and is expected to be negatively associated with the width of the latitude of acceptable prices.

H6: Price acceptability level is positively related to the width of the latitude of acceptable prices.

The rationale for this hypothesis is based in psychophysics. If applied to price perceptions, Weber's Law suggests that the width of the acceptable price range is directly proportional to the level of price acceptability (Monroe 1973). Therefore, as the level of prices consumers find acceptable increases, the width of the range about the price level also should increase.

METHOD

Product Class Studied In selecting a product class to serve as the arena of

study, several criteria were used. In particular, a product was sought for which ( 1) prices vary widely across alternatives, (2) product involvement levels vary across consumers, and (3) the judgment of objective product quality is relatively difficult, thus allowing for price-quality inferences. Based on these consider- ations, running shoes were selected as the product class of interest.

Sample Since it is unlikely that any general random sample

would contain enough running shoe buyers, a specialized sample frame was used. Questionnaires were mailed to a sample of 1,800 recent participants in a




popular regional road run. Because this event attracts runners of all levels of experience, it was believed that the chosen frame would provide adequate construct range and would ensure that respondents would use the product in a similar situational context allowing a stronger test of theory (Calder, Phillips, and Tybout 198 1). To test this assessment, three measures of attitudinal and behavioral commitment to running were examined for response variance. Analysis of the response distributions for these items indicated that a broad continuum of commitment and product usage levels was present.

Of the 1,800 surveys mailed, 452 individuals re- sponded within five weeks, providing a 25.1 percent response rate. Although nonrespondent analysis with the population of runners was not possible, differences from the general area population were found: the sample was more likely to be male, younger, and upscale in education and income.

Measures Exogenous Constructs. The first exogenous vari-

able, price consciousness, was measured with three five-point Likert scales that tapped consumer prefer- ences for paying low prices ("I usually buy running shoes when they are on sale," "I buy the lowest priced running shoes that will suit my needs," and "When it it comes to choosing a pair of running shoes for me, I rely heavily on price"). The second exogenous construct, product involvement, was captured by nine seven-point semantic differential scales (e.g., important/unimportant, nonessential/essential) adapted from Zaichkowsky (1985). Product knowledge, the final exogenous construct, was measured objectively through an assessment of respondents' actual awareness of product features (see Brucks 1985). A set of 18 running shoe characteristics, both actual and fictional, was developed from discussions with knowledgeable sporting goods retailers and reference to recent guides published by Runners' World maga- zine.

The actual attributes were: air wedge, dual density midsole, pronation control, toe box, nylon mesh up- pers, variable lacing, orthotic insole, heel counter, and slip lasting.

The fictional attributes were: cement construction, pentid structure, Gerlach reinforcement, atrium midsole, mylar, isotropic heel, helicity, cordran construction, and bent construction.

Respondents were instructed to check those attributes that they believed to be actual running shoe characteristics. Knowledge scores were calculated as the number of correct responses (i.e., actual attributes checked plus fictitious attributes unchecked).

Endogenous Constructs. The endogenous constructs studied were price-quality inferences, price

acceptability level, and width of the latitude of price acceptance. Based on the findings of Etgar and Mal- hotra (1981) and Zeithaml (1987), price-quality inferences were measured on an individual attribute level by asking respondents, "How much difference is there between $75 running shoes and $35 running shoes?" for each of eight different attributes. The eight product attributes were selected as representa- tive of attributes most often used in assessing quality in the product class based on discussions with local retailers. Responses were recorded on a five-point scale that ranged from "no difference at all" to "a great deal of difference." The choice of $35 and $75 price levels was based on expert retailer opinion and examination of Runners' World articles. The objective in selecting these boundary prices was to arrive at a range that includes the majority of running shoes, yet to keep the prices close enough to avoid biasing the study in favor of finding a price-quality relationship. Reliability assessments and item-total correlations for the eight-item scale indicated that four of the attributes (comfort, durability, protection, and workmanship) best portrayed price-quality inferences. Consequently, these four attributes were re- tained as measures of price-quality inferences. This set contains two of the three dimensions (i.e., comfort and durability) employed by Etgar and Malhotra (1981), providing cross-study evidence that the deter- minant attributes of quality have been represented.

Price acceptability level was assessed by two open- ended measures designed to assess a point estimate for the price levels that respondents considered acceptable for running shoes. The two open-ended statements were: "What is the amount you typically spend on running shoes?" and "The average amount I pay for running shoes is $ ." The first item was designed to assess the single dollar amount typically paid, and the second item was intended to capture the average price paid across situations. Because of the similarity of the two measures, they were separated in the questionnaire to minimize testing effects. Both measures are considered to be measures of price acceptability level because, by definition, the amount typically paid and average price paid must fall within the latitude of acceptable prices.2

The width of the latitude of price acceptance was measured as the difference between the following two measures: "The most I would pay for a pair of running shoes is $ ," and "The least I would pay for a nair of running shoes is $ 3

2 A caveat regarding these as measures of price acceptability level is in order. To the degree that there is variation across individuals in the position of these price level measures relative to their latitude of acceptable prices (e.g., for some individuals, the average price paid falls high in their latitude of acceptable prices, and for others it falls low), error will be introduced into the measure.

3 Note that the internal validity of this survey-based operationali- zation of the width of the latitude of acceptance has been ques- tioned (see Monroe 1971).




TABLE

CORRELATIONS, MEANS, AND STANDARD DEVIATIONS OF MEASURES

Indicator

Construct Y1 Y2 Y3 Y4 Y5 Y6 Y7 Xi X2 X3 X4 X5 X6 X7 X8 X9 X10 Xll X12

Price-quality inferences

Y1 1.000 Y2 .468 1.000 Y3 .501 .590 1.000 Y4 .489 .636 .545 1.000

Price acceptability

Y5 .243 .273 .340 .206 1.000 Y6 .161 .185 .216 .120 .655 1.000 Y7 .142 .089 .162 .052 .580 .463 1.000

Price consciousness

Xi -.044 -.046 -.096 -.063 -.265 -.258 -.223 1.000 X2 -.031 -.135 -.141 -.125 -.278 -.248 -.195 .428 1.000 X3 -.213 -.279 -.230 -.265 -.383 -.269 -.237 .384 .389 1.000

Product involvement

X4 .056 .167 .182 .109 .262 .185 .145 -.200 -.123 -.195 1.000 X5 .044 .144 .126 .109 .208 .125 .137 -.173 -.096 -.151 .669 1.000 X6 .016 .166 .157 .093 .199 .174 .095 -.198 -.120 -.187 .721 .590 1.000 X7 -.025 .146 .139 .102 .200 .144 .107 -.198 -.090 -.169 .635 .597 .670 1.000 X8 .012 .085 .082 .066 .134 .114 .102 -.191 -.134 -.121 .480 .506 .584 .640 1.000 X9 .104 .183 .197 .161 .198 .132 .116 -.247 -.126 -.210 .665 .646 .631 .628 .575 1.000 X1o .116 .212 .196 .144 .246 .177 .126 -.220 -.089 -.153 .605 .573 .602 .530 .506 .720 1.000 Xi1 .118 .167 .133 .126 .233 .175 .168 -.210 -.070 -.224 .574 .521 .576 .563 .583 .622 .626 1.000 X12 .101 .161 .118 .108 .155 .127 .119 -.218 -.055 -.166 .531 .543 .585 .651 .640 .586 .518 .668 1.000

X 3.77 3.83 4.04 3.86 52.66 51.53 34.76 2.46 3.09 2.56 5.75 5.61 5.69 6.17 6.15 5.91 5.48 5.80 6.18 S.D. 1.10 0.99 1.01 0.93 13.35 17.88 18.67 0.99 1.18 1.21 1.50 1.49 1.53 1.16 1.17 1.23 1.45 1.21 1.08

NOTE: Y1 = comfort differences; Y2 = durability differences; Y3 = protection differences; Y4 = workmanship differences; Y5 = average amount paid; Y6 = amount typically spent; Y7 = latitude of acceptance; Xl = reliance on price; X2 = buy when on sale; X3 = buy lowest price items; X4 = Important; X5 = relevant; X6 = essential; X7 = needed; X8 = beneficial; X9 = of concern; X10 = means a lot; Xl1 = valuable; X12 = useful.

ANALYSIS AND RESULTS The hypothesized set of relationships shown in the

Figure were tested using the estimation procedures for simultaneous equations (LISREL VI) developed by Joreskog and Sorbom (1986). Given the objective of only assessing associative relationships and not the intention of making causal inferences, the correlations shown in the Table were employed.

Preliminary Analysis Prior to testing the proposed structural relation-

ships, a moderated regression analysis, following the method of Sharma, Durand, and Gur-Arie (1981), was performed to assess the effect of product knowledge on the relationship between product involvement and price-quality inferences noted earlier. Product knowledge (mean = 13.4, sd = 2.8, range = 6-18) did not act as a significant predictor or mod-

erator variable. Therefore product knowledge was omitted in the structural model as a direct influence on price-quality inferences and also as a moderator of the relationship between product involvement and price-quality inferences.

Overall Model Analysis

The first step was an evaluation of the overall fit of the structural model as indicated by the chi-square statistic, which was significant (X2 = 393.75; df = 143; p < 0.001). Although a significant chi-square value indicates an inadequate fit of the model, its sensitivity to sample size confounds this finding and makes rejection of the model inappropriate based only on this evidence (Baggozi 1980). However, anal- yses that compensate for the effects of sample size do indicate that the overall model fit is satisfactory. Bentler and Bonett's (1980) incremental fit measure




results in a value of 0.91 (null model x2 = 4422.36), and Joreskog and Sorbom's (1986) adjusted goodness-of-fit index was 0.88, with a root mean square residual of 0.044. Each of these additional measures indicates the model provides a valid basis for interpretation of the measurement and structural models.

Measurement Model The measurement properties of the constructs were

assessed by calculation of the reliabilities for the four multi-indicator constructs, along with the estimates of extracted variance for each construct (Fornell and Larcker 1981). The exogenous constructs (price consciousness and product involvement) had reliabilities/extracted variance values of 0.66/0.40 and 0.93/0.60, respectively. Price-quality inferences had values of 0.83 /0.54, and the price acceptability level had a reliability of 0.80 and extracted 68 percent of the variance. Each of the indicators was significant ( C. V. = 2.236) in a one-tailed test at the 0.01 level.

Structural Model Estimation of the path coefficients for the model

(see Figure) resulted in support for each of the hypothesized relationships at the 0.01 significance level, except for Hypothesis 4, which is partially supported at the 0.01 level (relationship between product involvement and price-quality inferences) and partially at the 0.05 level (relationship between product involvement and price acceptability level). We decided to investigate the relationships of the two remaining paths in the Figure, although these were not hypothesized. The relationship between product involvement and the width of the latitude of price acceptance was nonsignificant, as was the relationship between price- quality inferences and the width of the latitude of price acceptance.

The coefficient of determination for the structural equations was 0.334, indicating a substantial degree of explanation for the relationships tested. Interpreta- tion of the standardized coefficients, along with the size of indirect effects for each construct on price acceptability, allows for an assessment of the relative contribution of each of the exogenous constructs. Analysis of the indirect effects revealed minimal and insignificant values for both exogenous constructs. Thus, relative importance can be assessed directly from the coefficients.4

DISCUSSION

Monroe (1984) suggests that when the price of a good is deemed acceptable, its perceived value is positive. Monroe and Petroshius (1981) define perceived value as the ratio of perceived quality ("get" component of an exchange) to price ("give" component of an exchange). Consequently, individual differences that are related to perceptions of these two exchange components have important implications for price acceptability.

Consumers' relative involvement in the resources yielded in purchase transactions (price) relative to benefits received (product) is instrumental in understanding levels of price acceptability. For a given product class, consumers more highly involved in price relative to product can be characterized as price conscious and tend to favor lower price levels. Con- versely, consumers more concerned with the product relative to the price can be characterized as product involved and are more willing to pay higher prices. These characterizations are consistent with conceptual definitions from the price perception and product involvement literature.

In addition to their direct relationships with price acceptability level, price consciousness and product involvement were also hypothesized to be indirectly related to price acceptability level via price-quality inferences. Individuals making price-quality inferences equate higher prices with superior quality, thus elevating levels of price acceptability. For individuals who do not link price with quality, higher prices reflect larger outlays of financial resources without compensating returns in quality, and thus higher prices are unlikely to be accepted. It was hypothesized that product involvement would encourage the formation of price-quality inferences when product knowledge was taken into account. However, price consciousness was expected to inhibit tendencies to make price-quality associations.

Empirical results supported all of the hypothesized relationships indicating that individual differences in price consciousness and product involvement are related to price acceptability. Price-quality inferences are positively related to price acceptability level, and price consciousness in a product class and product involvement are negatively related. Price consciousness is negatively related to price-quality inferences and price acceptability level. Product involvement is positively correlated to price-quality inferences and price acceptability level, and price consciousness is negatively related to the width of the latitude of price acceptance. Price acceptability level is positively related to the width of the latitude of price acceptance.

Although Hypothesis 4 was supported in that product involvement was positively related to price-quality inferences, some discussion is warranted given

4 Care must be taken in the strict interpretation of the standardized coefficients as reflecting relative importance of constructs. The relatively low reliability of the price consciousness exogenous construct has the impact of inflating structural coefficients. Addition- ally, the presence of correlated exogenous constructs may affect the structural relationships from these constructs as well. In both instances, however, the effects are not expected to change either the relative pattern or significance of the relationships.




FIGURE

RESULTS OF ANALYSIS OF PROPOSED MODEL

'. Price acceptability

.614

, Price \ * ,>{~~~~~~~~~-44 acceptability .603 ~Price

.672 onsciousness 44 x3

.799 -.334 .6 2

.752~~~~~~~~~~` x6

.792 Produc

xE involvement . . . * * * * * 045f*'ce

.825 significant at 0.01 L / / / _____ significant at 0.05

.761 Pd unhypcthesized path;|

.758

X 752

NOTE: Standardized coefficients are shown for each estimated parameter, except for measurement coefficients on both endogenous and exogenous constructs that were eliminated for clarity purposes. The chi-square statistic is 393.75 (d f = 143, p < 0.001).

that product knowledge did not moderate this relationship. Specifically, it was hypothesized that product involvement and its attendant focus on product quality would elicit price-quality inferences when product knowledge was low. Where such knowledge was high, as is typical with high product involvement, the consumer would have been likely to use objective quality cues rather than price. However, support for this moderating relationship was not found.

An actual positive relationship between price and quality might have exerted influence. If so, high- and low-knowledge consumers would hold positive price- quality perceptions: the former because such perceptions represent reality, the latter because such perceptions are a price-based inference. Although an actual price-quality relationship may be possible, it is unlikely. A recent article rating running shoes found

that the relationship between price and quality is weak (Consumer Reports 1986). Furthermore, based on ratings from three major running magazines, Ar- chibald, Haulman, and Moody (1983) found the average correlation between price and quality for running shoes to range from 0.035 to 0.232.

A more plausible explanation is that knowledge of running shoe characteristics may not be isomorphic with the ability to evaluate the quality of shoe brands. Respondents may know that pronation control is an important running shoe feature, but they may lack the ability to evaluate running shoes using pronation control as a criterion. Thus, the knowledge measure employed in this study may have only captured the former type of knowledge, but the latter type is needed to reduce reliance on price as a quality indicator.




Limitations Several limitations in the present study should be

noted. Because a specialized sample was employed and the response rate was moderately low, caution should be exercised in generalizing these results to other populations. Further responses to the upper and lower price limit measures may have been affected by the price limits supplied in the price-quality inference measure. However, the standard deviations for these measures show considerable variability across respondents. Also, it should be reiterated that because cross-sectional data were used, the relationships investigated should be interpreted as correlational in nature. Finally, the reliability of the price consciousness measure was below conventional stan- dards.

Implications for Future Research

Future research should continue to test and to re- fine relationships investigated in the present study and variables that moderate them. The impact of product knowledge on price perceptions warrants additional research attention as does the role of situational variables. In many situations, general tendencies to be product involved or price conscious appear to be suspended or accentuated. Researchers are also encouraged to test these relationships using additional types of products and measures. Particularly interesting would be the comparison of results pertaining to products that differ in the presence of an actual price-quality relationship.

Other issues worthy of research attention are de- terming which individuals make price-quality inferences and in what contexts they are made. Individual differences among consumers may be important in accounting for variation in the use of price as a quality signal (Peterson and Wilson 1985; Zeithaml 1987). Peterson and Wilson (1985) found that the use of price as an indicator of quality depends largely on whether the consumer possesses a price-quality schema. It is proposed here that individual differences in price consciousness and product involvement affect the propensity to infer quality based on price, as well as price acceptability levels. Future research should continue investigating individual difference and contextual factors that moderate the use of price as a signal of quality.

Future research could also take a broader view of the give and get components of an exchange (Zeithaml 1987). In addition to perceptions of the physical product and its quality, consumers' involvement with other receivables such as convenience or approval from others may also affect perceptions of value and price acceptability. Similarly, price need not be restricted to dollar outlays in future research. Nonmonetary expenditures of time or search effort

also may influence assessments of product value and price acceptability. In summary, it is hoped that the proposed relationships and accompanying tests will stimulate work in the area of price perceptions.

[Received June 1987. Revised March 1988.]

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