SON, JUNGHWA, Ph.D. Do Lower Prices Always Increase Willingness to Purchase? A Comprehensive Understanding Toward The Role of Perceived Price (2013). Directed by Dr. Byoungho Jin. 171 pp. Today, most firms assume that low price increases the likelihood of purchase. However, is this assumption always true? If the answer is no, when does the negative relationship between perceived price and willingness to purchase not hold true? This study systematically investigates the relationship between perceived price and willingness to purchase, incorporating three existing theories (i.e., signaling theory, equity theory, and Veblen’s theory of the leisure class). A conceptual research model consists of Phase I and Phase II: Phase I includes the antecedents of perceived price (i.e., symbolic brand benefits, perceived brand globalness, and perceived brand quality), and Phase II includes the moderators (i.e., perceived price fairness, vanity, and consumer sophistication) of the relationship between perceived price and willingness to purchase. Both Phase I and Phase II are tested in the U.S. and India, separately. Using a questionnaire survey with college students in the U.S. and India, 543 usable responses (287 from the U.S. and 256 from India) were analyzed for this study. Before analyzing the proposed hypotheses, measurement invariance tests were conducted to decide whether each construct measured the same factor structure and factor loadings across the U.S. and India. In both Phase I and II, the two countries revealed sharply contrasting results. In Phase I, four hypotheses were tested in each country. Of the three antecedents of perceived price, only perceived brand quality (γ =.23) had a positive relationship with perceived price among U.S. respondents. The additional paths suggested by modification indices indicated that symbolic brand benefits (γ =.16) and perceived brand globalness (γ =.20) had positive relationships with willingness to purchase in the U.S. In contrast, the path between perceived brand quality and willingness to purchase was not supported in the U.S. Surprisingly, none of antecedents of perceived price turned out to be significant for Indian consumers. Among the three additional paths suggested by modification indices, only perceived brand quality and willingness to purchase (γ =.21) was found to be significant in India. The negative relationship of perceived price-willingness to purchase was supported both in the U.S (β = -.37) and India (β = -.22). In Phase II, three hypotheses were tested in each country. Among the three moderators, perceived price fairness (β = .271) and vanity (β = .271) moderated the perceived price-willingness to purchase relationship in the U.S. Consumer sophistication did not have a moderating effect on the perceived price-willingness to purchase relationship. In the Indian data, none of the three moderators of the relationship between perceived price and willingness to purchase were supported. This study is one of the earliest attempts to examine the relationship between perceived price and willingness to purchase comprehensively in multiple countries (i.e., the U.S. and India). Findings from this study suggest that 1) marketers should pay attention to perceived brand quality in order to maintain a higher price in the U.S. and high purchase intention in India; 2) symbolic brand benefits and brand globalness should be promoted and stressed when marketers introduce products to U.S. consumers; 3) in order to increase purchase intention, building a concept of price fairness should be emphasized in the U.S.; and 4) marketers should intrigue and target consumers who have a high level of vanity in the U.S. DO LOWER PRICES ALWAYS INCREASE WILLINGNESS TO PURCHASE? A COMPREHENSIVE UNDERSTANDING TOWARD THE ROLE OF PERCEIVED PRICE by Junghwa Son A Dissertation Submitted to the Faculty of The Graduate School at The University of North Carolina at Greensboro in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy Greensboro 2013 Approved by Committee Chair © 2013 Junghwa Son APPROVAL PAGE This dissertation has been approved by the following committee of the Faculty of The Graduate School at The University of North Carolina at Greensboro. Committee Chair Dr. Byoungho Jin Committee Members Dr. Kittichai Watchravesringkan Dr. Jennifer Yurchisin Dr. Richard Ehrhardt Date of Acceptance by Committee Date of Final Oral Examination ii ACKNOWLEDGEMENTS I am very blessed to have many great people who have helped make this work possible. First of all, I would like to express my deepest appreciation and gratitude to my advisor and great mentor, Dr. Byoungho Jin, for all her insightful guidance, encouragement, passion, and tireless efforts during my doctoral program and development and completion of this dissertation. Without her help, I would not have been able to complete this dissertation. My appreciation has never been expressed enough from my heart to her. I also would like to thank my committee members, Dr. Kittichai (Tu) Watchravesringkan, Dr. Jennifer Yurchisin, and Dr. Richard Ehrhardt for their continuous support and valuable comments on my dissertation as well as their advice, encouragement, and insights throughout my doctoral program. Their guidance and help really made a difference in this study. I would like to extend wholehearted thanks to my parents, who always loved me, believed in me, supported me, and encouraged me to complete this dissertation with their generous comments. Thank you for your love and for always being there. I also wish to thank my mother and father-in-law for their countless understanding and supporting me at all times. I would like to thank my brother, Youngho Son, for his abundance of love, support, and encouragement. My daughter, Mijoo Chloe Jung, has always delighted me with her beautiful smile during my arduous journey. Furthermore, I give special thanks to my husband, Jongyeol Jung, who always loves me, cares for me, and gives me constant iii support, understanding, and encouragement. He deserves my deepest appreciation. Without my family members’ love, encouragement, and support, this arduous journey would not have been accomplished. I want to express great appreciation for my friends and whoever has encouraged and supported me through this process. Finally, I thank God for the many ways in which he has blessed my graduate life and made all this possible. iv TABLE OF CONTENTS Page LIST OF TABLES ........................................................................................................... viii LIST OF FIGURES .............................................................................................................x CHAPTER Ι. INTRODUCTION .................................................................................................1 Background ..................................................................................................1 Research on Perceived Price ............................................................2 Signaling Theory, Equity Theory, and the Theory of the Leisure Class: An Overview ..................................................5 Pricing Strategy in Emerging Markets .............................................7 Problems ......................................................................................................9 Research Questions ....................................................................................13 Purpose of the Study ..................................................................................14 Significance of the Study ...........................................................................15 Limitations .................................................................................................16 Definitions..................................................................................................17 Outline of Work .........................................................................................18 ΙI. REVIEW OF LITERATURE ..............................................................................19 Signaling Theory ........................................................................................20 Equity Theory ............................................................................................22 Veblen's Theory of the Leisure Class ........................................................23 Country Differences Between the U.S. and India ......................................26 Antecedents of Perceived Price .................................................................29 Symbolic Brand Benefits ...............................................................29 Perceived Brand Globalness ..........................................................32 Perceived Quality ...........................................................................35 Moderators on the Relationship of Perceived Price-Willingness to Purchase ...........................................................................................37 Perceived Price Fairness ................................................................38 Vanity .............................................................................................40 Consumer Sophistication ...............................................................43 Model Development ...................................................................................45 The Proposed Model ......................................................................45 Hypothesis Development ...............................................................48 v III. METHODOLOGY ..............................................................................................65 Data Collection ..........................................................................................65 Survey Instrument Development ...............................................................68 Symbolic Brand Benefits ...............................................................68 Perceived Brand Globalness ..........................................................69 Perceived Brand Quality ................................................................70 Perceived Price...............................................................................70 Perceived Price Fairness ................................................................71 Willingness to Purchase .................................................................71 Vanity .............................................................................................72 Consumer Sophistication ...............................................................72 Demographic Information ..............................................................73 Data Analysis .............................................................................................73 IV. FINDINGS ...........................................................................................................79 Measurement Invariance Test Analysis .....................................................79 Measurement Invariance Test on Symbolic Brand Benefits ..........80 Measurement Invariance Test on Perceived Brand Globalness ................................................................................81 Measurement Invariance Test on Perceived Brand Quality ..........82 Measurement Invariance Test on Perceived Price .........................83 Measurement Invariance Test on Willingness to Purchase ...........84 Measurement Invariance Test on Perceived Price Fairness ...........85 Measurement Invariance Test on Vanity .......................................86 Measurement Invariance Test on Consumer Sophistication ..........87 Confirmatory Factor Analysis....................................................................88 Structural Equation Modeling ....................................................................93 Phase I ............................................................................................94 Suggestions From Modification Indices for Phase I ......................99 Phase II.........................................................................................101 V. DISCUSSION AND CONCLUSION ...............................................................108 Summary ..................................................................................................108 Discussion of Findings .............................................................................110 Discussion of Findings in Phase I ................................................110 Discussion of Findings in Phase II ..............................................118 Implications..............................................................................................122 Theoretical Implications ..............................................................122 Managerial Implications ..............................................................124 Limitations and Future Studies ................................................................127 vi REFERENCES ................................................................................................................129 APPENDIX A. SURVEY QUESTIONNAIRE ...............................................................159 APPENDIX B. APPROVAL OF INSTITUTIONAL REVIEW BOARD (IRB) FOR THE USE OF HUMAN PARTICIPANTS IN RESEARCH ................................................................................166 vii