A brand of wine is priced at only $5 per bottle, far below the market price of most high quality wines. Before any reputation exists for the wine, consumers buy very little of this inexpensive wine because they interpret the low price to mean that the wine is of poor quality. The company decides to change the label on the wine to show that it has won awards for quality. This label change is an example of
A)signaling.
B)screening.
C)selecting.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

This label change is an example of signaling, as the company is attempting to convey information about the quality of their wine to potential consumers, in order to combat the negative perception associated with the low price. Screening and selecting involve the process of choosing between potential customers or products, and do not apply in this scenario.

A Brand of Wine Is Priced at Only $5 Per