De-targeting to signal quality

Research output: Contribution to journalArticle

Abstract

It is important for firms to signal the high quality of their products to consumers in experience goods markets. Conventional wisdom suggests that a high price can be a signal of high quality. However, we argue that the role of price in signaling quality could be weakened when firms resort to the intensive use of targeting in advertising, which could attenuate the informational content of a high price. As a consequence, a high quality firm needs to distort its price more to signal its quality. However, when different levels of targeting are available, a high quality firm may find it optimal to signal its quality with a lower level of targeting.
Original languageEnglish
Pages (from-to)386-404
Number of pages19
JournalInternational Journal of Research in Marketing
Volume37
Issue number2
Early online date16 Jan 2020
DOIs
Publication statusPublished - Jun 2020

Bibliographical note

© 2020, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

  • Asymmetric information
  • Quality signaling
  • Targeting

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