What pricing strategy leads people to assume that higher prices indicate better quality?

The pricing strategy that leads people to assume that higher prices indicate better quality is prestige pricing. This approach involves setting prices higher than competitors or higher than the perceived value in order to create an image of exclusivity and luxury. The underlying psychological principle is that consumers often associate higher prices with superior quality or brand prestige. It leverages the perception that higher costs reflect better materials, craftsmanship, and overall value, which can attract a certain demographic looking for premium products.

In contrast, price lining refers to setting a limited number of price points for a product line, psychological pricing focuses on pricing strategies that create a psychological impact, and penetration pricing aims to attract customers by setting a low initial price to quickly gain market share. None of these strategies inherently instate a belief in the quality associated with higher prices like prestige pricing does.