Journal of Retailing 81 (4, 2005) 319–329

Consumers’ store-level price knowledge: Why are some consumers

more knowledgeable than others?
Anne W. Mägi a,1 , Claes-Robert Julander b,∗
a University of Florida, Marketing Department, P.O. Box 117155, Gainesville, FL 32611, USA
b Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden

Accepted 28 February 2005

Abstract

What consumers know or think they know about stores’ relative price levels is an important research area from both a societal as well
as a retail perspective. This study investigates the determinants of objective as well as subjective store-price knowledge. Using structural
equation modeling, the effects of price consciousness, income, education, and three forms of price-related experience on the two knowledge
dimensions, as well as the relationship between objective and subjective knowledge, are tested. Whereas out-of-store price search had positive
effects on both subjective and objective price knowledge, the two other types of experience, number of stores shopped, and length of residence
in the market only affected objective price knowledge, indicating that the two knowledge dimensions are determined differently. Furthermore,
price consciousness had a larger effect on subjective than on objective knowledge. Finally, subjective and objective store-price knowledge
were not significantly related in this study.
© 2005 New York University. Published by Elsevier Inc. All rights reserved.

Keywords: Consumers; Store-price knowledge; Structural equation modeling

Introduction market models, found that price perceptions were second in

Consumers’ knowledge about individual prices has justi-
fiably received extensive attention from marketing and con-
sumer researchers (e.g., Dickson & Sawyer 1990; Vanheule &
Drèze 2002; Wakefield & Inman 1993). An equally important
phenomenon should be consumers’ store-level price knowl-
edge, that is, the extent to which their perceptions about
competing stores’ relative price levels are accurate. Perceived
price level, or price image, has been shown to be an important
determinant of store choice. For example, Arnold, Oum, and
Tigert (1983) found that price perceptions are the second most
important factor after locational convenience in logit mod-
els of store choice, and Severin, Louviere, and Finn (2001),
who did not include locational convenience in their super-
∗ Corresponding author. Tel.: +46 8 736 9013.
E-mail addresses: anne.magi@cba.ufl.edu (A.W. Mägi),
claes-robert.julander@hhs.se (C.-R. Julander).
1 The author is currently a visiting scholar at the University of Florida
Marketing Department. Tel.: +352 392 0161x1333.
importance to merchandise quality. When such perceptions
correspond poorly to actual price differences between stores,
consumers could end up patronizing stores they might not
have chosen with more accurate information. On the other
hand, consumers with good store-price knowledge would be
in a good position to make store choices that maximize their
utility.
Given the potential implications for store choice, it is
important to investigate factors that explain why some con-
sumers might have better store-price knowledge than others.
From a consumer welfare perspective, one would hope that
economically disadvantaged households would have compar-
atively good price knowledge since these households, in par-
ticular, would need the ability to distinguish more expensive
from less expensive stores. Indeed, in a recent meta-analysis,
the relationship between price recall and income was found
to be negative (Estelami & Lehmann 2001). However, in an
early study on store-price knowledge, income was positively
related to perceptual accuracy (Brown 1971), which suggests
that income might not have the same effect on store-price

0022-4359/$ – see front matter © 2005 New York University. Published by Elsevier Inc. All rights reserved.
doi:10.1016/j.jretai.2005.02.001
320 A.W. Mägi, C.-R. Julander / Journal of Retailing 81 (4, 2005) 319–329
knowledge as on product-price knowledge. One potential
explanation for the difference in results could be that more
complexity is involved in making store-price assessments
than in recalling or recognizing single prices, which could
benefit consumers with higher education who in general also
would have higher incomes.
Store-price knowledge is also interesting to study from
a retailer perspective. For individual store managers, it is
important to find out the degree to which their overall
price strategy is reflected in consumer price perceptions,
and whether there are systematic discrepancies in these per-
ceptions. Also, assessing the level of store-price knowledge
should enable retailers to better understand the effectiveness
of price competition in a particular market. If overall objec-
tive store-price knowledge is low, this would indicate that
in general consumers are unaware of the pricing strategies
employed by retailers and that non-price factors could have
a substantial impact on price perceptions. Under such con-
ditions, it would be more difficult to manage a store’s price
image. Thus, in general, retailers should be better off when
overall price knowledge is good.
With the exception of Brown’s work on store-level price
perception validity (1969, 1971), no previous study that the
authors are aware of has investigated store-price knowledge
and its determinants. The purpose of this paper is to address
this gap in the research literature. In line with previous
research on consumer knowledge (e.g., Park, Mothersbaugh,
& Feick 1994), both objective and subjective store-price
knowledge will be included in the study, taking into account
that what consumers think they know and what they do know
are two different phenomena. The following section will
present the background for the study and hypotheses concern-
ing the determinants of objective and subjective store-price
knowledge, respectively. In the remainder of the paper, results
from a study that combines survey data with price data col-
lected in-store will be presented.
Background
Consumer knowledge has been an important construct in
the consumer behavior and marketing literatures for decades
(Alba & Hutchinson 1987, 2000; Brucks 1985; Park et al.
1994). In particular, consumers’ knowledge about different
products, brands or product classes has been explored. This
stream of research generally distinguishes between objective
knowledge, that is, what the consumer actually knows as mea-
sured by an objective task, and self-perceived, or subjective
knowledge, namely what the consumer thinks she/he knows
(Brucks 1985; Park et al. 1994). Studies have shown that
subjective and objective knowledge are only associated to a
low or moderate degree, indicating that many consumers are
poorly calibrated when it comes to their own assessment of
their knowledge (Alba & Hutchinson 2000). This also means
that self-report measures of knowledge are rarely good indi-
cators of actual knowledge.
Both knowledge dimensions are relevant study objects. As
outlined in the introduction, a consumer’s level of objective
knowledge affects his or her ability to make optimal product,
or store, choices. Subjective consumer knowledge reflects
consumer confidence and has been shown to affect informa-
tion search and other purchase related behaviors (Flynn &
Goldsmith 1999). In addition, the goal to better understand
the nature of the relationship between the two knowledge
dimensions in itself warrants the inclusion of both in any
study on consumer knowledge.
Price knowledge
Consumer price knowledge has primarily been investi-
gated by assessing consumers’ ability to recall prices for
specific consumer products that they are in the process of
buying (Dickson & Sawyer 1990; Wakefield & Inman 1993).
These studies show that many shoppers are unable to recall
the price of a product they have just placed in their shopping
cart, which has been taken as evidence of poor price knowl-
edge among consumers. Recently, it has been suggested that
price recall may only measure one aspect of price knowl-
edge since memory for price information might not be easily
recalled, but still might influence consumer purchase deci-
sions (Monroe & Lee 1999). Based on this premise, Vanheule
and Drèze (2002) also investigate price recognition and deal-
spotting ability. Although consumers in general tended to be
better at these tasks, a large share of respondents did not per-
form well on any of them. Thus, independent of which aspect
of price knowledge is investigated, studies in this area indi-
cate that consumers vary extensively as to their level of price
knowledge with a substantial share of consumers exhibiting
fairly poor levels of knowledge.
Given the variation in price knowledge at the individual
product level, it seems reasonable to assume that consumers
will also vary extensively in their store-price knowledge.
Accurately assessing the price level of a store is, in addition,
a much more daunting task. Retailers and grocery retailers,
in particular, normally carry several thousands of products.
Thus, consumers not only need to process and memorize
information about specific prices, but also need to integrate
information into an overall assessment of the store’s price
level. Furthermore, price-level assessments are relative in
nature since prices at other stores need to be taken into
account, which increases the amount of information that
needs to be processed. Given the complexity of this task,
consumers tend to resort to simplifying heuristics that may
be misleading (Alba, Broniarczyk, Shimp, & Urbany 1994).
Consumers’ knowledge about stores’ relative price levels
can be manifested in an ability to assess how much price lev-
els differ between stores, for example, that the prices in store
A are on average 5 percent higher than the prices in store B,
but 10 percent lower than the prices in store C. However, even
less detailed knowledge about store price levels could be use-
ful for the consumer. Specifically, the ability to rank stores
according to their price levels could aid the consumer in mak-
 A.W. Mägi, C.-R. Julander / Journal of Retailing 81 (4, 2005) 319–329
ing choices between stores. Consumers’ ability to accurately
rank stores was, in fact, used by Brown (1971) as the indi-
cator of store-price knowledge. In addition, although some
consumers might not be able to rank most of the stores in
their market area according to price, they might still be able
to correctly identify which of two stores is more expensive if
the difference between the stores’ price levels is substantial.
Overall, since consumers’ knowledge about price levels can
be useful even in cases when it is not very detailed, measure-
ments of store-price knowledge should reflect various levels
of specificity of knowledge.
Determinants of store-price knowledge
Based on the consumer knowledge and price recall lit-
eratures, this section will discuss potential determinants of
objective and subjective store-price knowledge, respectively.
The hypothesized model tested in this study is presented in
Fig. 1.
Park et al. (1994) show that product experience in terms
of usage, ownership, and information search affects both
objective and subjective knowledge. It is intuitive that con-
sumers need experience with the knowledge domain in order
to gain objective knowledge. Memories of product experi-
ences are also highly accessible cues that consumers tend to
use when making an assessment of how much they know. Park
et al. (1994) find, furthermore, that experience affects sub-
jective knowledge to a higher degree than it affects objective
knowledge. Thus, while a product-related experience does
not necessarily lead to the correct encoding of veracious infor-
mation in memory, it is likely to have an impact on subjective
knowledge.
In the case of store-price knowledge, domain relevant
experience would be exposure to price information from
Fig. 1. Hypothesized model.
321
different stores, both in terms of advertising and visits to
competing stores. That is, the more consumers behave in a
manner that increases their exposure to prices, the more likely
it is that both their objective store-price knowledge and their
subjective store-price knowledge are extensive. It has been
shown that although most consumers shop in only a handful
of stores (Urbany, Dickson, & Sawyer 2000), the number of
stores used on a regular basis varies extensively (Mägi 2003),
and we hypothesize that this will be reflected in consumers’
price knowledge. Likewise, consumers vary in whether or not
and how often they read grocery stores’ ads and fliers, and
this should also affect price knowledge.
H1. The number of stores frequented on a regular basis has
a positive effect on (a) objective and (b) subjective store-price
knowledge.
H2. The amount of out-of-store price search has a positive
effect on (a) objective and (b) subjective store-price knowl-
edge.
Another aspect of experience that could be of importance
for store-price knowledge is its duration. The longer the time
the consumer has had experience with the stores in the par-
ticular market, the better are his or her opportunities to learn
about their relative price levels. It is also possible that con-
sumers over time pay less attention to prices thinking that
they already have good knowledge about competing stores’
price levels. If that is the case, length of residence will have
a stronger effect on subjective knowledge than on objective
knowledge.
H3. The length of residence in the market has a positive
effect on (a) objective and (b) subjective store-price knowl-
edge.
322 A.W. Mägi, C.-R. Julander / Journal of Retailing 81 (4, 2005) 319–329
Studies on grocery shopping indicate that some con-
sumers are inherently more motivated to comparison shop
(Mägi 2003; Stone 1954; Williams, Painter, & Nicholas
1978). These price conscious consumers should be more
likely to shop in more stores, read more store advertising,
and thereby become more knowledgeable about stores’ price
levels. Wakefield and Inman (1993) find that price recall accu-
racy is higher for individuals who use price in making brand
decisions, which suggests that such an effect would also be
plausible on the store price level. Although not including pos-
sible mediating effects, Brown (1971) also finds a positive
relationship between using price as a basis for store choice,
and the ability to rank stores according to price levels.
In addition, the perceived importance of comparing prices
might have a direct effect on what consumers think they know.
Radecki and Jaccard (1995) argue that self-relevance can
have an effect on subjective knowledge through dissonance
mechanisms, independent of any effects through objective
knowledge. That is, if a topic is relevant to the consumer
she/he is less likely to acknowledge a low level of knowledge
about it. Price-conscious shoppers should find the topic of
grocery prices highly relevant and would thus be less likely
to admit, even to themselves, that they might have low price
knowledge.
H4. Price consciousness has positive indirect effects on (a)
objective price knowledge and (b) subjective price knowledge
mediated by effects on out-of-store price search and number
of stores frequented.
H5. Price consciousness has a positive direct effect on sub-
jective price knowledge.
Income could be argued to be a factor that at least norma-
tively would increase the self-relevance of store prices—low-
income households should have more to gain from being
aware of differences in stores’ price levels. In addition, it has
been argued that high-income households perceive the alter-
native cost of time spent on price search as higher (Stiegler
1961; Wakefield & Inman 1993). Income per household
member has been shown to negatively affect price search in
the grocery market (Urbany, Dickson, & Kalapurakal 1996),
although wage rates have been shown to have only a mod-
erate effect on the subjective value of time spent on price
search (Marmorstein, Grewal, & Fishe 1992). Income has
been shown to have a negative effect on price recall (e.g.,
Wakefield & Inman 1993), and a recent meta-analysis found
a negative relationship between income and price recall accu-
racy (Estelami & Lehmann 2001). However, Brown (1971)
found that store-price knowledge increased with income.
Dickson and Sawyer (1990) also found that consumers in
a less advantaged housing area exhibited lower price recall
ability. This suggests that the nature of the effects of income
on price-related knowledge is far from clear, and while a nega-
tive effect seems intuitive, it needs to be empirically assessed.
H6. Income has a negative indirect effect on objective price
knowledge through direct effects on price consciousness and
price search behavior.
H7. Income has a negative indirect effect on subjective price
knowledge through direct effects on price consciousness and
price search behavior.
Apart from experience and motivation, ability to process
domain-relevant information should also be an important pre-
dictor of knowledge. Regarding consumers’ ability to acquire
store-price knowledge, it is reasonable to suggest that it
would increase with the level of formal education. Capon and
Kuhn (1982) show that consumers tend to use more elaborate
and accurate reasoning strategies for evaluating deals with
increasing education. Based on the argument that education
reflects ability to process price information, we hypothesize a
direct effect of education on objective store-price knowledge.
However, we also assume that education is positively related
to income. If hypothesis H6 holds, it is therefore possible that
any positive direct effect would to some extent be cancelled
out by a negative indirect effect through income. Since this
would depend on the magnitude of effects, we do not posit a
specific hypothesis regarding the total effect of education on
objective price knowledge.
H8. Education has a positive direct effect on objective price
knowledge.
Finally, it seems reasonable to assume that consumers with
good actual knowledge would also perceive themselves as
more knowledgeable (Radecki & Jaccard 1995). However,
research shows that consumers are in general poorly cali-
brated in their assessments of their own knowledge (Alba
& Hutchinson 2000). The correspondence between objective
and subjective knowledge could possibly also vary across
knowledge domains. For example, Radecki and Jaccard
(1995) found a moderate effect in the context of birth control
methods, but no significant effect in the context of nutritional
contents of foods. No previous study has investigated the
relationship between subjective and objective knowledge in
the domain of store price levels to indicate the nature of the
relationship in context. Therefore, we hypothesize that objec-
tive store-price knowledge will have at least some effect on
subjective store-price knowledge.
H9. Objective store-price knowledge has a positive effect
on subjective store-price knowledge.
The study
Data collection
Two data sets were used for this study: proprietary price-
index data collected from stores in one Swedish market area
 A.W. Mägi, C.-R. Julander / Journal of Retailing 81 (4, 2005) 319–329
and a mail survey sent out to a random sample of residents in
the same market. The data for the price index was collected in-
store in the form of a weighted basket of about 300 common
daily commodities. Products were sampled so as to cover all
product categories and maximize the item-by-store hit, and
their respective prices were weighted by sales volume. The
price data were collected from a total of twenty stores ranging
from traditional formats in the city center, to superstores and
discount grocers. All four main Swedish grocery chains are
present in this market. The twenty stores together completely
dominate the local market with close to a 90 percent grocery
market share. Moreover, one of the dominating chains is a fed-
eration of retailers with substantial intra-chain competition.
Thus, the level of competition in the market and the vari-
ance among competing stores were judged to be sufficient
for the investigation. There are about 100,000 inhabitants in
this market.
The questionnaire was mailed to 944 households in the
area; 543 individuals responded to the questionnaire. Respon-
dents with incomplete answers on key variables for the anal-
yses were removed, as were shoppers who indicated that they
only did a minor share of the household’s grocery purchases.
This resulted in a sample of 462 usable cases. Sixty-four per-
cent of the respondents in the sample were women, and the
average age was 47 with a range of 20–83 years.
Measures
In the literature on product-price knowledge, the ability
to recall the exact price of a particular product has been the
predominant measure of objective price knowledge (Estelami
& Lehmann 2001). A recent study (Vanheule & Drèze 2002)
also used measures of price recognition that take into account
the notion that consumers can be knowledgeable about store
prices without being able to recall them. Especially in a
grocery retailing context, consumers might not pay much
attention to particular prices. However, incidental exposure
to prices might still affect implicit memory and be reflected
in improved performance in, for example, recognition tasks
(Monroe & Lee 1999). In the case of objective store-price
knowledge, consumers are not typically exposed to specific
pieces of information representing average store prices that
could be either recalled or recognized at a later date. Rather,
store price perceptions are judgments made by the con-
sumer based on product price information in either explicit
or implicit memory as well as other cues. Therefore, methods
of measuring price knowledge developed for product prices
are not readily applicable for store-price knowledge.
In this study, indicators of objective store-price knowledge
were based on the respondents’ assessments of the price levels
of five of the largest stores in the area. Respondents were
asked to indicate the price levels of five dominating stores in
the area. Apart from their size, the choice of stores was also
based on the variance in price-levels among them. Store A
(Chain 1) is a discount grocer with a 10 percent market share,
Store B (Chain 2) is a superstore with a 14 percent market
323
share, Store C (Chain 3) is a superstore with a 19 percent
market share, Store D (Chain 2) is a supermarket with a 5
percent market share, and Store E (Chain 4) is a supermarket
with a 2 percent market share. All other stores included in
the price survey had market shares of 5 percent or lower.
The stores’ relative price levels are reported in the bottom
half of Table 2 in the form of percentage point deviations
from the market average. To simplify the task, 11-point scales
anchored in “approximately 25 percent lower than market
average” to “25 percent higher than market average” were
used. The question was organized in a matrix form, so the
judgments of each store were visually easy to compare. The
question resembles the recognition task used in product price
studies by taking into account that while consumers might
not be able to recall store-price levels, consumers with better
objective store-price knowledge should perform better on the
assessment task. Since the answers on the objective knowl-
edge questions are of substantive interest in themselves, some
results are provided in Table 2.
Three indicators of a latent objective price knowledge vari-
able were computed from comparisons of the judgments of
the price level of each store, with the price levels estimated
from the price data. The first indicator (knowledge of price
levels) reflects consumers’ knowledge of the stores’ exact
price levels. It was computed by comparing the price level
indicated by the respondent to the price-level as measured by
the price data. If the respondent chose the correct category
(e.g., prices approximately less than 15 percent for Store A,
where prices were 14.6 percent below the market average),
the respondent received six points. For the next two closest
response categories (prices approximately less than 20 and
10 percent, respectively), the respondent received five points,
and the points decreased by one with each additional step
that the provided response differed from the correct response
category. If the respondent did not provide an answer for a
particular store they received zero points. With a total of six
points per store and five stores, the knowledge of price levels
scale had a theoretical range of 0–30. The actual range was
0–29 and the mean score was 14.8 (SD = 7.46).
The next two variables both reflect the extent to which
respondents were able to rank correctly the stores in terms
of price levels. The first variable (overall ranking ability)
was constructed by comparing each respondent’s ranking of
the five stores to the actual rank order. For this purpose, a
Spearman rank-order correlation coefficient was computed
for each respondent for the correlation between the five
stores’ price levels according to the respondent’s assessment
and the stores’ price levels according to the price indices. Due
to the substantial number of non-responses on the price-level
assessments for some of the stores, missing data were recoded
in a manner as to represent the lowest level of knowledge
(prices higher than 25 percent for Stores A–D, and prices
lower than 25 percent for Store E). Values on this variable
ranged from −.94 to .99 (M = .04, SD = .68).
The third indicator of objective store-price knowledge
captured the respondent’s ability to make correct rankings
324 A.W. Mägi, C.-R. Julander / Journal of Retailing 81 (4, 2005) 319–329

Table 1
Confirmatory factor analysis for multiple-item measures
Lambda loadings Construct reliability Variance extracted
Subjective knowledgea
I have good knowledge about prices on groceries .88 .85 .66
Compared to most other people, I know less about current prices on .71
groceries (rev. coded)
When it comes to grocery prices, I think I know a lot .85
Objective knowledge
Knowledge of price levels .82 .93 .88
Pairwise rankings .97
Overall ranking ability .94
Out-of-store price searchb
I read the ads grocery stores publish in the newspapers .88 .84 .71
I read the fliers that grocery stores mail to me .84
Price consciousnessa
I compare what I get for my money in different stores .82 .82 .60
I choose where to shop based on were I can find what I need at the .64
lowest prices
I always compare the prices in the stores that are accessible to me .85

Fit statistics
χ2 /df/p-value 56.6/38/.00
Root Mean Square Error of Approximation .03
Comparative Fit Index .99
Goodness-of-Fit Index .98
a Ten-point scales anchored in strongly disagree–strongly agree.
b Ten-point scales anchored in never–always.

between pairs of stores (pair-wise ranking). For each pair
of stores, the respondent received one point for each correct
comparison. With five stores, the theoretical range on this
variable is 0–10. The distribution on the variable from no
correct comparisons to ten correct comparisons is, in per-
centages: 19, 12, 9, 7, 4, 6, 8, 6, 16, 9, 3 (the percentages
do not add up to 100 due to rounding). The mean for the
variable was 4.3 (SD = 3.37). It should be noted that even if
the prices were lower in Store C than in Store D, their correct
price levels are in the same response category (approximately
lower than 5 percent). In order to account for this, the respon-
dent received a correct score for the comparison if either the
same response category had been indicated for each store, or
a lower price level was indicated for store C.
The questionnaire also included three items reflecting
subjective price knowledge (Flynn & Goldsmith 1999),
three items reflecting consumers’ price consciousness
(Lichtenstein, Ridgway, & Netemeyer 1993; Mägi 2003), and
two items measuring price search behavior. Ten-point scales
were used for all of the above items. In the questionnaire,
the items for the first two scales were intermixed with non-
price-related items not used in this paper in order to reduce
the tendency for carry-over effects. A confirmatory factor
analysis was performed on the multiple-item scales objec-
tive store-price knowledge, subjective store-price knowledge,
price consciousness and price search, to assess the reliability
of the measures. This analysis yielded satisfactory results
(Table 1). The squared correlations between all pairs of
constructs were lower than the variance extracted for each
construct, providing an indication of discriminant validity
(Fornell & Larcker 1981).
Finally, respondents were asked to indicate their monthly
disposable household income, including benefits and after
tax. In the analysis, household income was divided by number
of people in the household to take into account that budget
constraints are dependent on total household income relative
to household spending levels. Respondents were also asked
which stores they had shopped in during the past two months.
The number of stores shopped in ranged from one to nine,
with an average of 3.6 (SD = 1.63). Length of residence was
measured by asking respondents to indicate how long they
had lived in the particular city on a four-point scale (less than
1 year, 1–5 years, 6–10 years, and more than 10 years). Level
of educational attainment was also measured on a four-point
scale. Means, standard deviations and correlations for the raw
data are presented in Appendix A.
Results
Consumers’ store-price knowledge
Respondents’ assessments of the price levels of the five
stores are presented in Table 2. In the table, the stores are
organized according to their price level, with Store A having
the lowest price level. As mentioned previously, each store’s
price level relative to the market average is reported in the
lower part of the table. The category representing the correct
answer for each store is marked in bold.
 A.W. Mägi, C.-R. Julander / Journal of Retailing 81 (4, 2005) 319–329 325

Table 2
Price perceptions of the main stores in the market
Store A Store B Store C Store D Store E
Percieved deviation from market average
Approx. 25 percent lower 3 1 0 0 0
Approx. 20 percent lower 10 2 1 0 1
Approx. 15 percent lower 20 4 2 1 0
Approx. 10 percent lower 39 20 14 1 2
Approx. 5 percent lower 17 29 21 5 7
Price level corresponds to market average 9 26 34 24 18
Approx. 5 percent higher 2 9 11 21 19
Approx. 10 percent higher 1 7 10 27 24
Approx. 15 percent higher 0 3 6 13 14
Approx. 20 percent higher 0 1 1 5 9
Approx. 25 percent higher 0 0 1 2 5

Actual deviation from market average −14.6 −8.7 −6.1 −3.1 +6.8
Average perceived deviation from market average −10.1 −2.6 0.2 +6.6 +7.5
Non-response (percentage) 29 21 16 33 47
Frequencies in percent. The correct response category for each store is marked in bold.

For all stores except Store D, about 20 percent of respon-
dents who provided a price-level assessment gave a correct
answer. With a more generous definition of an adequate
answer including the next two response categories, we find
that between 30 (Store D) and 69 percent (Stores A and C)
of the answers are correct. Comparing the average assessed
price levels (the second to last row of Table 2) with the actual
price levels shows that on average the respondents also gener-
ate a correct rank order of the stores according to price level.
Taken together, this indicates that although the variance is
substantial, there are consumers who seem to have a fairly
good idea of the relative price levels of competing stores
in this market. However, the high level of non-response has
to be noted—it ranges from 16 to 47 percent for the five
stores—which implies that a large share of consumers in the
market are either unable or unwilling to provide price-level
assessments of the main stores in the market.
Viewed from a managerial perspective, the results sug-
gest that stores’ relative positioning in terms of price levels
are, on average, fairly accurately perceived by consumers.
However, Store D constitutes an interesting exception: the
store’s perceived price level is clearly biased upward. In fact,
it is believed to be almost as expensive as Store E whereas the
price data indicates that the difference in price levels between
the two stores is almost ten percentage points. One potential
explanation for the biased perception of Store D suggested by
the retailer providing the data is that Store D had an image as
an upscale supermarket that was not congruent with its price
level, which was almost as low as that of the two superstores
in the market. Data were not available for a formal test of
the hypothesis, but the case clearly illustrates the effects of
non-price factors on price perceptions.
Structural equation model
We used maximum likelihood estimation with LISREL
8.52 based on the covariance matrix to test the hypothe-
ses set forth in the paper. The error variances of the single
indicators were set at .1sx2 to reflect moderate levels of mea-
surement error (Anderson & Gerbing 1988). The specified
model fit the data adequately. However, based on a review
of modification indices, an additional path was included in
the model. This path linked level of education to price search
and its interpretation will be provided below. Standardized
estimates, goodness-of-fit indices and explained variance for
the key dependent variables are presented in Table 3.
The results provide support for hypotheses H1–H3, with
the exception of H1b and H3b indicating that the types
of experience investigated in this study affect objective
price knowledge and in one case, subjective price knowl-
edge. Although the number of stores frequented positively
affects objective price knowledge, the effect on subjective
knowledge is both insignificant and in the wrong direction.
That is, although patronizing several stores does increase
actual knowledge, consumers do not seem to realize that
this behavior affects their knowledge levels. This suggests
that a fair amount of passive learning of prices occurs when
consumers shop across stores (Monroe & Lee 1999) that is
not reflected in explicit memory and thus not available when
consumers assess their own knowledge levels. A similar
explanation can be provided for the lack of effect of length
of residence on subjective knowledge. Although the length
of exposure to the pricing strategies of stores in a particular
market increases objective knowledge, much of this might
constitute passive learning. If so, that could explain why
consumers would not consider length of residence as a cue
when assessing their knowledge.
Price consciousness is reflected in both a higher num-
ber of stores shopped and a higher level of price search.
The total indirect effects of price consciousness on objective
and subjective store-price knowledge are, respectively, .10
(t = 3.73) and .05 (t = 2.01), which supports H4. The positive
effects of price consciousness and number of stores shopped
on objective price knowledge contrasts with findings from
326 A.W. Mägi, C.-R. Julander / Journal of Retailing 81 (4, 2005) 319–329

Table 3 Education has the expected positive effect on objective

Standardized coefficients and fit statistics for the structural model price knowledge (H8). However, the added path in the model
Parameter Estimate t-value signifies that education is negatively related to price search.
Number of stores frequented → subjective −.08 −1.88 A possible explanation of this effect could be that shoppers
knowledge with higher education often have the type of occupation that
Price search → subjective knowledge .14a 2.96 requires long working hours, and thereby have less time to
Price consciousness → subjective knowledge .66a 11.55
Length of residence → subjective knowledge .06 1.55
spend on household chores, such as perusing newspaper ads
Objective knowledge → subjective knowledge .07 1.83 for grocery stores. Although the negative effect on search to a
Number of stores frequented → objective .17a 3.58 limited degree cancels out the direct positive effect of educa-
knowledge tion on objective knowledge, the total effect of education on
Price search → objective knowledge .13b 2.52 objective knowledge is positive and significant (.19, t = 3.72).
Length of residence → objective knowledge .10b 2.02
Education → objective knowledge .22a 4.21
Finally, although directional, the effect of objective price
Price consciousness → number of stores .24a 4.59 knowledge on subjective price knowledge was not significant.
frequented The model explained a substantial share of variance in subjec-
Price consciousness → price search .40a 7.55 tive store knowledge whereas the share of explained variance
Education → price search −.25a −5.08 in the objective knowledge variable was fairly modest.
Income/household size → price search −.07 −1.44
Income/household size → price consciousness −.04 −.78
Education → income/household size −.03 −.59 Discussion
Fit statistics The results show that although the perceptions of the
χ2 /df/p-value 126.4/78/.00 stores’ relative price levels on average are reasonably accu-
Root Mean Square Error of Approximation .03
Comparative Fit Index .99
rate, objective store-price knowledge varies extensively
Goodness-of-Fit Index .97 across consumers in the particular market studied. From a
societal perspective it is rather disheartening that many con-
Explained variance Objective Subjective sumers seem to have quite low levels of knowledge about the
knowledge knowledge comparative price levels of the stores they can choose from.
Squared multiple correlations .09 .53 However, given the limited amount of research in this area it
a Significant at p < .01. is premature to conclude that large consumer segments have
b Significant at p < .05. insufficient levels of store-price knowledge, since we do not
know what “sufficient knowledge” implies in the domain of
store-price knowledge.
Vanheule and Drèze (2002), which showed that consumers From a retailer perspective, the variability in objective
who claimed to cross-shop in order to find better prices, did store-price knowledge confirms that price perceptions are
not have better product-level price knowledge as reflected in fairly malleable and to a substantial degree affected by non-
price recall and recognition. The inconsistency in results may price factors. This suggests that store price perceptions are
indicate that different mechanisms lead to objective store- difficult to manage and that merely changing price levels is
level and product-level price knowledge. not likely to be an effective measure for obtaining a change
Price consciousness also has a significant direct effect on in a store’s price image. For individual stores, particularly for
subjective price knowledge (H5). The magnitude of the effect retailers that like Store D tend to be perceived as significantly
suggests that consumers are prone to use self-relevance as a more expensive than they are, it is also important to inves-
cue when making assessments of their own knowledge. That tigate what the particular factors are that affect price image.
is, when making this assessment, the more price conscious The results also suggest that consumers in many cases are
they are, the more likely they would be to believe that they unaware of retailers’ overall pricing strategies.
are very knowledgeable about prices. Although the results were directional, income did not
It is noteworthy that although directional, the effect of have the expected negative effects on price search or price
income on price consciousness and price search was not sig- consciousness and consequently on neither objective nor sub-
nificant, suggesting that income may not be an important jective price knowledge. Apart from factors limited to the
determinant of price-related behaviors and in turn of price specific market surveyed, a possible explanation for the weak
knowledge (H6 and H7). There was, furthermore, no effect effect of income could be that households with low income
of educational attainment on income. This can, in part, be might adapt their consumption behavior rather than their price
explained by the fact that income was measured at the house- search behavior and, therefore, do not exhibit above average
hold level since the household’s total disposable income is an levels of price knowledge. Moreover, it could also be argued
indicator of household budget constraints. The contribution that price search behavior would not necessarily decrease
of the respondents’ individual income levels to total house- with increasing income. Shopping-related habits, for exam-
hold income might vary greatly, thus concealing any effects ple regarding price search, developed early in life could be
of education on income. sustained even though the shopper’s financial situation might
 A.W. Mägi, C.-R. Julander / Journal of Retailing 81 (4, 2005) 319–329
improve later. Finally, this study assumes that disposable
income level (relative to household size) is the main determi-
nant of a household’s spending capacity, but clearly housing
costs and other fixed monthly payments would also affect
household budget constraints.
Education did have the expected positive effect on objec-
tive store-price knowledge, which suggests that ability is an
important determinant of objective knowledge in this domain.
Given the complexity of the task, this should not be sur-
prising. Although education was not related to income in
this study, which, in part, could have been due to different
measurement levels, it is likely that education is related to
household income in markets where income distributions are
wide and in general for single or one-parent households. This
would imply that consumers who would benefit the most from
good price knowledge are least able to acquire it.
As suggested earlier, time poverty could be an explana-
tion for why education had a negative effect on price search
behavior. Time usage and perceived time poverty could be
important determinants of price search and by extension price
knowledge, since acquiring and processing price information
from several stores is a time-consuming activity. Consumers
who are neither willing nor able to spend time on grocery
shopping-related tasks would thus potentially have lower
price knowledge.
Price consciousness, which in itself was not determined
by income, did have indirect effects on both knowledge con-
structs mediated by price-search behavior and store patron-
age, as well as a direct effect on subjective price knowledge.
Perhaps psychological benefits or being a skilled shopper are
more important than the money saved by being a vigilant
shopper.
Finally, this study corroborates previous findings from the
knowledge literature by showing that subjective and objec-
tive knowledge in the domain of store-price knowledge are
not strongly related. The level of miscalibration can poten-
tially be explained by the complexity and ambiguity involved
in assessing store price levels (Park et al. 1994); when infor-
mation gained from experience tends to be ambiguous, the
gap between subjective and objective knowledge could be
substantial, since extensive exposure to information about
the product or service does not necessarily lead to better
objective knowledge, whereas the amount of information
in memory, no matter how inaccurate, is seen as an indi-
cator of good knowledge by the consumer when making a
self-assessment. Although information on product prices in
itself is not ambiguous, the sheer amount of price informa-
tion that needs to be taken into account should make the
assessment of store price levels ambiguous. Calibration also
requires unambiguous feedback about one’s judgments (Alba
& Hutchinson 2000), but in the case of store-price knowledge
consumers in general are likely not exposed to such informa-
tion. With the lack of appropriate feedback, biasing effects
such as beliefs about one’s competence (Alba & Hutchin-
son 2000), in this case the consumer’s self-perception as a
price-conscious shopper, have full reign.
327
Further research
Store-level price knowledge has to date received scant
attention in the marketing and consumer behavior literatures.
We hope this study will encourage others to investigate this
phenomenon, and would like to suggest a few different direc-
tions for further research.
A key area for further study is the consequences of store-
price knowledge. In particular, it would be important to
investigate whether consumer price knowledge is related to
store choice behavior. Moreover, it would also be interest-
ing to investigate the difference in effects between subjective
versus objective knowledge in this domain, given that the
discrepancy between these two dimensions of knowledge is
substantial.
Although this study did identify some of the determinants
of objective store-price knowledge, the share of explained
variance was modest and future studies should look at other
possible determinants. One such factor could be motivation
to process information. Education, which in this study was
used as an indicator of ability to process information, could
also be an indicator of motivation to process information.
By including measures that tap into information processing
motivation, such as need for cognition (Cacioppo, Petty, Fein-
stein, & Jarvis 1996), future studies will be able to analyze
the relative effects of ability and motivation on knowledge
acquisition, and also improve the overall explanatory power
of models on consumer knowledge. Including other dimen-
sions of price-related experience, such as word-of-mouth,
could also improve our understanding of how price knowl-
edge is formed. A broader range of measures of experience
would also allow for a comparison of a model in which experi-
ence is modeled as a formative latent construct, with a model
in which each experience dimension has its separate effect.
As mentioned above, it could also be fruitful to include time
usage and time poverty in models of consumer price knowl-
edge. Such measures would reflect consumers’ opportunity
to acquire price knowledge.
Consumers’ price consciousness turned out to be an
important predictor of both objective and subjective store-
price knowledge. However, contrary to expectations this
variable was not linked to household income. Although this
result could in part be specific to this study, the lack of rela-
tionship indicates that there are other determinants of price
consciousness. For example, a consumer’s price conscious-
ness might in part have been learned in childhood (Moore,
Wilkie, & Lutz 2002). Time usage and perceived time avail-
ability could potentially also be important determinants given
that consumers face a trade-off between saving time and sav-
ing money. It is also possible that market-related factors could
affect price consciousness; consumers might tend to focus
more on price differences and engage in across-store compar-
isons in markets where discount retailers have a large market
share.
This study focuses on price knowledge for grocery stores,
which we found a natural choice given the importance of gro-
328 A.W. Mägi, C.-R. Julander / Journal of Retailing 81 (4, 2005) 319–329

cery spending for the household as well as the frequent nature
of grocery shopping. However, future studies should extend
the approach taken here to other retail sectors. It would also be
interesting to investigate whether objective price knowledge
is generally better in retail sectors where consumers shop
frequently, or whether consumers tend to be more knowl-
edgeable about competing stores’ price levels for high-ticket
items.
Finally, this study has looked exclusively on store-level
price knowledge. For future studies, it would be relevant to
link store-level knowledge to item-level price knowledge.
Although it is plausible that consumers with good product-
level price knowledge also have good store-price knowledge,
differences between the two knowledge levels could,
for example, arise due the differences in store patronage pat-
terns.
Acknowledgements
The authors wish to thank Jo Andrea Hoegg, Barton Weitz
and the reviewers for helpful comments on this manuscript,
and ICA Handlarnas AB, Sweden, for making the data avail-
able for research.
Appendix A. Correlations, means and standard
deviations for the raw data

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Subjective knowledge
1. I have good knowledge 1.000
about prices on groceries
2. Compared to most other .623 1.000
people, I know less
about current prices on
groceries (rev.)
3. When it comes to .742 .609 1.000
grocery prices, I think I
know a lot
Objective knowledge
4. Knowledge of price .102 .129 .103 1.000
levels
5. Pairwise rankings .104 .138 .102 .800 1.000
6. Overall ranking ability .106 .128 .102 .782 .932 1.000
Price search
7. I read the ads grocery .321 .282 .315 .082 .082 .045 1.000
stores publish in the
newspapers
8. I read the fliers that .318 .253 .313 .039 .102 .076 .733 1.000
grocery stores mail to
me
Price consciousness
9. I compare what I get for .564 .399 .526 .082 .080 .085 .299 .294 1.000
my money in different
stores
10. I choose where to shop .325 .250 .340 .113 .111 .125 .228 .178 .498 1.000
based on were I can find
what I need at the lowest
prices
11. I always compare the .505 .382 .487 .029 .036 .041 .329 .295 .681 .580 1.000
prices in the stores that
are accessible to me
12. Number of stores .089 .082 .071 .205 .203 .161 .052 .010 .232 .191 .143 1.000
frequented
13. Education −.049 −.016 −.055 .167 .166 .178 −.224 −.204 −.002 −.064 −.076 .129 1.000
14. Household −.048 −.055 −.005 −.061 −.047 −.071 −.074 −.050 −.025 −.065 −.015 −.120 −.026 1.000
income/household size
15. Length of residence .079 .100 .089 .073 .075 .066 .115 .110 −.011 .070 .048 .026 −.164 .059 1.000

Means 5.53 6.60 5.84 14.76 4.27 .14 5.82 6.62 5.38 5.31 4.34 3.55 2.86 17.57a 10.54
Standard deviations 2.50 2.69 2.44 7.46 3.37 .64 3.17 3.17 2.87 3.22 3.02 1.63 1.07 13.7 3.28
a Measured in 1,000 SEK. 1 USD was approximately equal to 10 SEK at the time of data collection.
 A.W. Mägi, C.-R. Julander / Journal of Retailing 81 (4, 2005) 319–329
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