Quality, value, satisfaction, trust, a

alternatives prior to the choice decision. The notion we use simply extends the principle for comparison
of attribute differences across alternatives. More formally, there is evidence in the literature that people
compare attributes of different alternatives in certain decision-making scenarios. The lexicographic
decision rule involves comparing the attributes of different alternatives before deciding on the better
alternatives (of course after determining that they tie on the other more important attributes). Examples of
attribute comparison between alternatives also appear in other writings as well (e.g., Gale 1994).
Therefore, from a conceptual perspective, comparing attributes between alternatives is reasonable.
Finally, the specific rationale for considering tradeoffs in governing choice has been discussed in
Simonson and Tversky (1992). Though their work focuses on attraction and compromise effects and
changes in tradeoffs between background choice set and focal choice set (it does not consider changes in
tradeoffs for a given choice set due to price changes nor are they concerned with price changes nor
quality tier competition). The conceptual validity of our approach can be understood by their statement
“... the choice between x and y then depends on whether the consumer is willing to pay $200 more for an
additional 320K memory...” (Simonson and Tversky 1992 p. 282). Further, in their work on relative value
theory (though unrelated to quality tier competition), Hollman and Lynch (1997) compare different
formulations of attribute tradeoffs and find that the formulation similar to the one used in this article
supports the choice process better than those based on other operationalizations. Thus, the notion of
quality/price tradeoff has intuitive appeal, face validity, and literature support.
The following discussion is based on Figure 1. For that framework, let us consider a two-brand
market with brands denoted H and L. Let the price differential be denoted ‘b’ and the quality differential
be denoted ‘a’ in the base condition of no price promotion. Note that quality means the quality perceived
by the consumer. The proposed conceptual framework (consistent with other work in the literature)
assumes that high quality brand is high priced and low quality brand is low priced). However, we do not
assume that price is necessarily an indicator of quality in the short run (for example, when price reduction
occurs, the quality is not assumed to change in the short run). Further, most work in this research stream
assume the existence of price or quality tiers and also assume that high priced tier is of higher quality
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