Study: Scarcity affects consumers’ use of price to judge quality

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One thing to consider during the business disruptions due to the pandemic is how it can affect perceptions of your business’ prices.

According to new research from the Indiana University Kelley School of Business, scarcity decreases consumers’ tendency to use price to judge a product’s quality.

“Scarcity is aversive and triggers the desire to compensate for the shortage, and to seek abundance,” said paper co-author Ashok Lalwani, associate professor of marketing at Kelley. “People who face scarcity are less likely to view less vs. more expensive options as belonging to different categories, and thus are open to differences at either or both ends of the price continuum.”

While shoppers often judge the quality of a product based on its price, that changes during times of scarcity, when they are less likely to categorize objects and are less likely to use the price of a product to infer its quality, Lalwani and his co-authors found.

But what does that means for owners of shops that rely on high prices as an indicator of quality? Lawlani suggests encouraging consumers to categorize assorted items by price to make it easier to use price-tiers as a basis for judging a product’s quality.

The researchers’ findings also suggest that when stronger price-quality inferences are desired, retailers should avoid promoting how scarce an item is.

Other authors of the paper, “The Impact of Resource Scarcity on Price-Quality Judgments,” were Hanyong Park, assistant professor of marketing at the Eli Brand College of Business at Michigan State, and David Silvera, retired associate professor of marketing at the University of Texas at San Antonio.