While the price dispersion may seem high, it is not exclusive to the audiophile market. There are several studies, for example, Gerstner 1985, which find that the price-quality relationship is not as robust as often believed. For the price-quality relationship to arise, a sufficient number of consumers have to be informed about quality so that a firm cannot risk losing their patronage by charging a high price for a low quality product. There will always be other consumers who take price as a signal of quality, essentially trusting that “the market” has kept the firms’ urge to sell low quality products at high prices in check.

However, the point is sometimes made that unlike many other markets, with AV components (a) it is simple to electronically compare the fidelity of reproduction of a digital signal at the input and output ends of these devices, and (b) it is equally simple to do double-blind comparison of these devices. Thus the subjective or perceived element can be reduced. But, in fact, it’s not so common to see a review that actually does such comparisons. Reviews are based on a couple of listening experiences, might mention tangible things like the packaging, gold-plated contacts and weight - the DVD player has a “solid” feel to it. On the positive side, design and manufacturing quality like price can signal overall quality.

To return to the issues of why HDMI cables are sold at such price difference, possible explanations are: (a) There is no objective quality difference and manufacturers take advantage of the consumers’ belief in the price-quality relationship. (b) There is no objective quality difference but the music actually sounds better coming from a more expensive component (like a placebo effect). (c) Higher priced components have objectively better quality, as this article claims. (d) Each of the above explanations plays a contributing role.

Unlike a company in a weaker competitive or financial situation, Microsoft gets the chance to fix its problems. It is instructive to see how it has gone about it. First, the technological complaints regarding Vista should be taken care of by its Service Pack updates. Service Pack 1 has been released and 2 is likely to be released soon. So the remaining question is, what can marketing do about the negative perceptions regarding Vista?

Here is some of what Microsoft did, and I leave it to readers to assess if they should have done anything different. An ad campaign starring Bill Gates and Jerry Seinfeld was run. See the video link here to Microsoft’s own site. Another ad campaign called “I’m a PC” aimed to improve the competitive positioning of PCs versus Macs. Finally, “the Mojave Experiment” was Microsoft’s attempt to use blind tests to persuade customers that Vista is a good OS .

This paper is all about empirical methodology, and in my research I don’t normally spend a lot of time on that kind of thing. But then, once in a way comes along an idea that makes us all sit up because it is so clever, and so obvious in hindsight, and in a word so beautiful. This paper has such an idea. I will let you find out for yourself what it is. I had perused the paper before I got to New York, and was curious to find out if my initial reaction to the paper was justified. The speaker, Jeremy Fox, soon confirmed my assessment with a presentation that was as informative and disarming as it was definitive. The participants’ comments, especially on the validity of the idea’s simplicity claim were it to be compared to Bayesian methods, and of the exact applications where its full force would be present were just as interesting. It occurs to me that this idea will soon find a place in the estimation toolbox of most marketing scholars. What may need to be sorted out is for which models it would be most beneficial to exploit the idea. I am not an expert in this area, but I will watch this with interest.

Every year I look forward to the SICS conference in Berkeley in the summer, and now after attending the last two years, I will add QME to my calendar. SICS with its emphasis on analytical modeling happens to be more central to my research but QME is also a well organized and stimulating conference and there is much to gain from its emphasis on empirical methodologies and to a lesser extent on substantive findings. Perhaps QME will return to the more freewheeling discussion of past meetings that is also an essential feature of SICS. And finally, I should put in a word for UTD-FORMS conference which will take place in February 2009, and that will be the third year in a row. With its format similar to SICS and QME, and emphasis on substantive issues in marketing this conference could well be seen as the third leg of a tripod bringing current research in marketing to everyone. Not coincidentally, I was a discussant in all three conferences in 2008. And I really enjoyed them all.