Price and Quality

An interesting article at Stephen Shankland's Underexposed blog, reporting research showing that people rate a wine priced at $90 per bottle higher than the same bottle of wine priced at $10. (It's worth noting that the test subjects don't know that it's the same wine.) Shanklnad says, "The research, along with other studies the authors allude to, are putting a serious dent in economists' notions that experienced pleasantness of a product is based on its intrinsic qualities. "

Well, except that I'm not sure all--or most--or many--or even only a few--economists would agree that the perceived quality of a product is based solely on the "intrinsic qualities" of the product. Thorstein Veblen argued a long, long time ago that one indicator that people use of quality is price; this is likely to be truer when product quality is difficult to judge (and, given the results of wine-tastings--and the differences in judgments between experts--the "intrinsic" quality of wine is, perhaps, not something to hang one's hat on).

I think that many--most?--all?--economists would agree that consumers do use price as an indicator of quality when other quality markers are obscure or difficult to evaluate. And so I see this as conformation of an economic consensus, rather than a serious dent in anything.