Discrepant Beliefs About Quality and Taste

Marketers and researchers assume (sometimes implicitly) that products are vertically and/or horizontally differentiated and that consumers recognize this differentiation. Across multiple paradigms and product categories, we examine and challenge this assumption. We find instead that the nature of product differentiation largely resides within each consumer and, as a result, consumers can hold starkly different beliefs about how any given set of products is differentiated. These beliefs about vertical differentiation (quality) and horizontal differentiation (taste) are meaningful and malleable: changing these beliefs affects meaningful consumer outcomes including willingness to pay and self-referencing language, and reconciling incompatible choices can affect one’s beliefs. These findings have important implications for consumer behaviors that depend on other consumers, such as herding, bidding, delegation, andsearch, and market implications such as auctions and uniform pricing.