Brand Signal Quality of Products in an Asymmetric Online Information Environment: An Experimental Study

Previous research regarding the effectiveness of brand name signalling has focused mainly on when and how marketers will recover costs. This study reverses this trend by examining how buyers may interpret signals via the brand name, the effectiveness of signalling via brand name in terms of buyer-value perspectives and how buyers' reactions to signals affect sellers' decisions to adopt a signalling strategy. Signalling theory and concepts from consumer-based branding research are used to suggest how to evaluate the effectiveness of signalling via brand name in the context of the consumer market - a market in which information is asymmetric. Findings from a number of repeated experiments, using the methodology of experimental economics, demonstrate that the function of a brand fluctuates according to which market conditions prevail for brand and price, the extent of brand differentiation and the magnitude of brand-building costs.