Abstract
A stream of marketing research indicates that price often affects consumers' pre-purchase perceptions of quality. Interestingly, however, most studies that have assessed the effect of price on quality have utilized physical products rather than services. Moreover, the effect of price on assessments of quality has typically measured before respondents have an opportunity to consume the target product. This paper reports the results of a study that found that the effect of price on post-purchase perceptions of service quality is contingent on consumers' perceptions of contextual cues. Specifically, only when consumers evaluate contextual cues to be worse than their expectations does a higher price increase their perceptions of service quality. Implications of these findings and avenues for future research in services are discussed.
