Advertising, quality, and willingness-to-pay: Experimental examination of signaling theory

Hsiao-Chien Tsui

Journal of Economic Psychology, 2012, vol. 33, issue 6, 1193-1203

Abstract: According to the quality signaling theory, firms are motivated to invest more advertising in high-quality products. This paper conducts an experiment through a closed-ended double-bounded dichotomous choice of the contingent valuation method to measure consumer willingness-to-pay for a fictitious cell phone market of varying quality before and after advertising. The results show that advertising effectively influences consumer awareness of perceived quality and enhance their WTP. The results also suggest that even though the high- and low-quality products differ in the investment of advertising, the effect of advertising on the increase in consumer WTP for low-quality products as well as for high-quality products.

Keywords: Advertising effect; Quality; Willingness-to-pay; Contingent valuation method (search for similar items in EconPapers)
JEL-codes: L15 M21 M37 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:33:y:2012:i:6:p:1193-1203

DOI: 10.1016/j.joep.2012.08.011

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