Explain the price-quality relationship for a simple product

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Reference no: EM13722485

Assignment:

Reliance on price as a predictor of quality seems to occur for all products. Does this mean that high-priced products are superior? Well, sometimes. Price can be a good predictor of quality for some products, but for others, price is not always the best way to determine the quality of a product or service before buying it. This exercise (and worksheet) will help you examine the price-quality relationship for a simple product: canned goods.

Activities

1. Take a trip to a local supermarket where you are certain to find multiple brands of fruits and vegetables. Pick a single type of vegetable or fruit you like, such as cream corn or peach halves, and list five or six brands in the worksheet below:

(1) Brand	(2) Quality Rank (y)	Price			(6) d (y-x)	(7) d²
(1) Brand	(2) Quality Rank (y)	(3) Price/Weight	(4) Price per Ounce	(5) Price Rank (x)	(6) d (y-x)	(7) d²






TOTAL

2. Before going any further, rank the brands according to which you think is the highest quality (1) to the lowest quality (5 or 6, depending on how many brands you find). This ranking will be y.

3. Record the price and volume of each brand. For example, if a 14-ounce can costs $.89, you would list $.89/14 oz.

4. Translate the price per volume into price per ounce. Our 14-ounce can costs $.064 per ounce.

5. Now rank the price per ounce (we'll call it x) from the highest (1) to the lowest (5 or 6, again depending on how many brands you have).

6. We'll now begin calculating the coefficient of correlation between the price and quality rankings. The first step is to subtract x from y. Enter the result, d, in
column 6.

7. Now calculate d² and enter the value in column 7. Write the sum of all entries in column 7 in the final row.

8. The formula for calculating a price-quality coefficient r is as follows:

r_s=1-6 Σd²/(n3-3)

In the formula, r_sis the coefficient of correlation, 6 is constant, and n is the number of items ranked. Note: d2 means d square, and n3 is n cubed.

9. What does the result of your calculation tell you about the correlation between the price and the quality of the canned vegetable or fruit you selected? Now that you know this, will it change your buying habits?

10. Write a short summary of your results and upload the paper to the Assignment section on Sakai.

Reference no: EM13722485

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