Joseph Gallo poured two glasses of wine from the same bottle but put a more expensive price tag on one glass than on the other. He let people test both and asked them which they wanted, and most wanted the more expensive glass, not knowing that both had come from the same bottle. This result indicates that firms should:
A) be careful about lowering the price of their product, because consumers may assume that a lower price means lower quality.
B) be careful about raising the price of their product, because the law of demand is always valid.
C) never lower the price of their product.
D) always raise the price of their product.

Question

Quizplus · Accepted Answer

Consumers often associate higher prices with higher quality, so lowering prices might lead them to perceive the product as lower quality.

Joseph Gallo Poured Two Glasses of Wine from the Same