A Study of Country-Of-Origin Effects On Willingness To Pay

Are Consumers Really Willing to Pay
More for a Favorable Country Image?

A Study of Country-of-Origin Effects
on Willingness to Pay
Nicole Koschate-Fischer, Adamantios Diamantopoulos, and Katharina Oldenkotte
ABSTRACT
Price-related consequences of the country-of-origin (COO) cue have received limited attention in extant literature. In
this study, the authors draw from equity theory and cue utilization theory and investigate (1) whether a brands COO
affects a consumers willingness to pay and (2) the extent to which the consumers familiarity with the brand moderates
this relationship. The results of three complementary experimental studies reveal that COO indeed has a positive
impact on willingness to pay. Furthermore, the authors find a negative moderating influence of brand familiarity on the
COO effect in a high-involvement setting but not in a low-involvement setting. The authors discuss the theoretical and
managerial implications of the findings, and they identify directions for further research.
Keywords: country of origin, willingness to pay, brand familiarity, experimental research
ne of the oldest and most persistent concerns in

international marketing is whether the origin of a
product makes it more or less preferable to consumers. Country of origin (COO) serves as an extrinsic
informational cue for consumers perceptions and
evaluations of a product (Verlegh and Steenkamp 1999),
and research on COO effectsthat is, the impact that
cognitive, affective, and normative associations with a
particular country have on consumer attitudesshows
that a products COO acts as a signal of product quality,
influences consumers perceptions of risk and value, and
directly affects the likelihood of purchase (for recent
Nicole Koschate-Fischer is Professor of Marketing (e-mail:

nicole.koschate-fischer@wiso.uni-erlangen.de), and Katharina Oldenkotte is a postdoctoral researcher (e-mail: katharinaoldenkotte@
gmx.de), GfK-Chair of Marketing Intelligence, University of
ErlangenNuremberg. Adamantios Diamantopoulos is Professor of
International Marketing, Chair of International Marketing, University of Vienna (e-mail: adamantios.diamantopoulos@univie.ac.at). The
authors thank the Dr. Theo and Friedl Schller Research Center for
Business and Society and the Hans Frisch-Foundation for supporting
this research study. They also thank the four anonymous JIM reviewers for useful comments over several review rounds.
reviews of COO research, see Jaffe and Nebenzahl

2006; Pharr 2005; Phau and Chao 2008; Wilcox 2005).
Various articles in the business press also underscore the
relevance of the COO effect. For example, after several
recalls and disasters associated with products made
overseas (e.g., lead in toys), U.S. consumers became sensitive to product origins, and many now actively search
for products Made in the USA (Martin 2007).
Yet despite the acknowledged importance of COO
effects, their price-related consequences remain neglected, such that very little is known regarding the influence of COO on pricing decisions (Agrawal and
Kamakura 1999, p. 257). Extant COO research has
mainly focused on consumers quality evaluations and
intentions to purchase a product. However, several metaanalyses and recent empirical studies indicate that the
COO effect loses its strength when purchase intentions,
Journal of International Marketing
2012, American Marketing Association
Vol. 20, No. 1, 2012, pp. 1941
ISSN 1069-0031X (print) 1547-7215 (electronic)
Country-of-Origin Effects and Willingness to Pay 19
and not quality perceptions, serve as a dependent

variable (Josiassen, Lukas, and Whitwell 2008; Verlegh
and Steenkamp 1999); indeed, COO has significantly
lesser impact as consumers move closer to the actual
purchase situation from belief formation regarding the
relative quality of brands (Agrawal and Kamakura
1999, p. 256).
Focusing on price rather than quality evaluations or purchase intentions as a dependent variable offers a (much)
stricter test of COO effects because price represents the
amount of money we must sacrifice to acquire something
we desire (Monroe 2003, p. 5); thus, it is possible for
consumers to evaluate a product from country X more
positively than a product from country Y but, at the same
time, be unwilling to pay a price premium for it. Similarly,
consumers may indicate a greater willingness to buy a
product from country X, though they may not actually
purchase the product because they find its price unacceptable. Thus, product evaluations and purchase intentions are softer outcome variables than price and therefore are more likely to reveal a COO effect than if price
serves as the dependent variable.
A second reason for focusing on price is that it allows
for the monetization of the COO effect (Nebenzahl
and Jaffe 1993) because it reveals the extent to which
consumers perceptions of different COOs are reflected
in the differences in the amount that those consumers
are prepared to pay for products associated with each
COO. In this context, intuitively, it should be self evident that, ceteris paribus, a country having a better
image than others, especially as a source for a product,
has a comparative advantage that should translate to
economic value (Jaffe and Nebenzahl 2006, p. 59).
From a practitioner perspective, being able to monetize the COO effect is of great significance because
price is one of the most powerful marketing-mix elements due to its direct and disproportional impact on
profitability (Han, Gupta, and Lehmann 2001). Marn
and Rosiello (1992), for example, report that a price
increase of 1% leads to an average 11.1% improvement
in operating income,1 whereas a 1% increase in sales volume enhances operating income by only 3.3%. For given
operating costs, higher prices due to a more favorable
country image will lead to an increase in operating
income and, thus, higher profitability.
Against this background, the current study investigates
the link between the COO of a branded product and
consumers willingness to pay (WTP) for it. In this context, COO designates the country where the product is
20 Journal of International Marketing
made-in, which may or may not coincide with the

home country of the brand, that is, the brand origin
(Jaffe and Nebenzahl 2006). Willingness to pay refers to
the maximum amount of money a consumer is willing to
spend for a product (Homburg, Koschate, and Hoyer
2005). To the best of our knowledge, with the exception
of Hu and Wangs (2010) study, which focuses on the
origin of (online) retailers and used real transaction
data, no previous COO investigations have examined
WTP as a dependent variable.
From a managerial point of view, knowledge of individual
consumers WTP is crucial for the construction of price
response functions (Vlckner 2008), as well as for the
implementation of popular pricing instruments, such as
price differentiation, value-based pricing, or price bundling.
Furthermore, consumers retrieve and use their WTP as an
internal reference price that influences their purchase decisions (Miyuri and Bettman 2005). Thus, WTP represents a
highly relevant yet neglected outcome variable worthy of
investigation in a COO research setting.
We apply equity theory (Adams 1965) to conceptually
underpin our investigation and conduct a series of
experiments designed to reveal the extent to which consumers are willing to spend more money for a branded
product that originates from a COO with a favorable
image than for a branded product from a COO with a
less favorable image. We also apply cue utilization theory
to investigate the role of brand familiaritythe extent
of a consumers direct and indirect experience with a
brand (Campbell and Keller 2003, p. 293)as a potential moderator of the COOWTP relationship. We
hypothesize that the strength of the COO effect may
depend on the consumers familiarity with the brand
involved (Josiassen, Lukas, and Whitwell 2008) and
examine this relationship in both a low- and highinvolvement setting. In the former setting, we employ
Becker, DeGroot, and Marschaks (1964) procedure
(hereinafter, BDM) to measure consumers WTP. The
BDM procedure is a highly accurate approach for revealing respondents true WTP because of its incentivecompatible character and realistic point-of-purchase setting (Wertenbroch and Skiera 2002).
Our studys contribution is threefold. First, on the theoretical front, we apply equity theory as a theoretical
framework to the relationship between COO perceptions and consumers WTP and provide empirical evidence as to whether this effect exists. Furthermore, we
investigate whether brand familiarity moderates the
strength of the COO effect on WTP in both low- and
high-involvement situations. To the best of our knowledge, our study is the first to analyze in a comparatively
realistic point-of-purchase setting the extent to which a
branded products origin directly influences the price
that the consumer is willing to pay for the brand.
Second, on the methodological front, we illustrate the
application of the BDM approach and thus introduce
researchers to a promising procedure, which, though
used in other fields (e.g., Homburg, Koschate, and
Hoyer 2005), has not yet been applied in COO-related
research. Although the BDM method can realistically be
applied only when low-priced products are involved
because participants are actually obliged to buy the
productit nevertheless enables a researcher to study
actual buying behavior rather than simply purchase
intentions. This is important because there exists a gap
between what consumers say they are going to do and
what they actually do at the point of purchase (Carrington, Neville, and Whitwell 2010, p. 141).
Third, on the managerial front, we provide empirically
based insights into the extent to which consumers will
pay price premiums or expect price discounts, depending on the COO of the product. These insights are of
substantial value to international marketing managers
designing a pricing strategy, particularly when the consumer is confronted with product offerings from multiple COOs differing in their image. Thus, our studys
findings provide managerial support for decisions
related to customer value-oriented pricing, price differentiation, and market segmentation (Monroe 2003).
PRIOR RESEARCH
COO and Price
Price-related consequences of COO have been widely
neglected in extant literature because few researchers
have attempted to study the country image effect on
product price (Nebenzahl and Jaffe 1993, p. 161). The
handful of studies that address price-related issues in a
COO context focus either on consumers price tolerance
(Drozdenko and Jensen 2009; Nebenzahl and Jaffe
1993) or on actual sales prices (Agrawal and Kamakura
1999; Hulland, Todio, and Lecraw 1996). Price tolerance studies reveal a base price for a product associated
with a given COO and then ask consumers to indicate
how much more or less they would be willing to pay for
the same product if it were made in another country.
However, the base price may serve as an anchor (Simonson and Drolet 2004), and direct comparison of the
countries may cause demand effects (Johansson 1989).

Conversely, studies focusing on the link between COO
and actual sales prices indicate the prices consumers are
actually willing to accept for a product but do not reveal
the maximum amount of money consumers are willing
to pay (i.e., their WTP) (Garbarino and Slonim 2003).
Only a single, recently published study (Hu and Wang
2010) has examined, in an online auction setting
(eBay), whether consumers are willing to pay different
prices for a given product depending on the origin of
the retailer. The results reveal that U.S. retailers are able
to command a premium, which appears to stem from
country-of-origin equity instead of trading risk or product quality (Hu and Wang 2010, p. 200). Using actual
transaction data, the study thus provides support for
price-related consequences of the COO in an international trading context.
Our study is similar to Hu and Wangs (2010) in the sense
that it is also based on an auction mechanism; however, it
differs from the latter study in several important ways.
Specifically, Hu and Wang use eBay data in which participants have the opportunity to adjust their offer (WTP)
and thus react to steps undertaken by the other participants of the auction. In contrast, with the BDM procedure, respondents do not compete with other bidders, and
there is no interaction between the various players
involved because the final price is determined on the basis
of a lottery. Moreover, in Hu and Wangs investigation,
the origin of the retailer, and not that of the product, was
the focus of analysis. The image that respondents associate with a retailer of a certain country is not necessarily
the same as the one they associate with a product of a certain country and is likely to be based on different criteria
(e.g., sales skills, delivery times). Finally, in contrast to Hu
and Wang, we explicitly investigate the influence of a
moderating variable (brand familiarity) on the COO
effect. In summary, our study has a different focus and a
different methodology and thus provides complementary
insights to those Hu and Wang provide.
WTP as a Dependent Variable

Considering the COO of the product as an influence on
consumers WTP, an obvious question is whether using
the latter as a dependent variable is likely to generate
insights beyond those generated by product evaluations
or buying intentions. After all, WTP would be expected
to correlate positively with outcome variables (particularly purchase intentions) for which a COO effect has
already been established in prior research.
We believe that such additional insights can be expected

for at least three reasons. First, if two variables are correlated, this does not automatically mean (1) that they must
share the same antecedents or (2) even if they do, that the
impact of these antecedents can be assumed to be the
same for both variables. As an example, consider product
evaluations and purchase intentions, which are positively
correlated and have been widely used as outcome
variables in COO research. Do they have the same
antecedents? Not necessarilyconsumer animosity, for
example, has been found to affect purchase intentions but
not product evaluations (see, e.g., Klein, Ettenson, and
Morris 1998). Is the impact of their common antecedents
the same? Again, the answer is noCOO, for example,
has been found to explain, on average, approximately
30% in product evaluations but less than 20% in purchase intentions (Peterson and Jolibert 1995).
Second, a basic premise underlying COO research is
that consumer preferences will be greater for products
from a favorably rated COO because their product
evaluations will be more positive. However, this premise
focuses only on the benefit side of the COO influence
and fails to consider the sacrifice side. Consumers
may indeed assess products coming from certain COOs
more favorably than from other COOs, but this does
not automatically imply that they are also willing to
make the necessary (monetary) sacrifice to actually buy
them. Focusing on WTP reminds consumers that
there is also a cost associated with acquiring products,
thus encouraging them to be more careful when indicating their preferences.
Third, while the use of intentions data to predict behavior is widespread among academics and practitioners
alike, it is not without problems. Specifically, intentions data often contain systematic biases; intentions
change over time and may not accurately predict actual
purchases (Sun and Morwitz 2010, p. 356). Indeed,
economists, observing the frequent divergence between
stated intentions and subsequent behavior, generally
ignore intentions data (Manski 1990, p. 936). Ignoring
the discrepancies between intentions and purchase
behavior can cause biased results, and thus the use of
intention ratings alone could be misleading (Sun and
Morwitz 2010). By focusing on consumers WTP, as
measured with the BDM approach (as we do in two of
our experiments), we are able to study how COO affects
actual behavior. This is important both because it provides a much stricter test of the COO effect than either
product evaluations or purchase intentions and because
actual purchase behavior is hardly ever studied in COO
research (Usunier 2006). Indeed, our focus on WTP is

consistent with recent calls in the literature to focus on
the importance of the COO at the time of purchase
rather than assessing this at any other time (Josiassen
and Harzing 2008, p. 266, emphasis in original).
THEORETICAL BACKGROUND AND

HYPOTHESES
Equity Theory and COO
We employ equity theory (Adams 1965) to underpin the
hypothesized relationship between COO and WTP.
Equity theory involves exchange relationships in which
people compare the outcome they receive from an
exchange to the input they provide into the exchange.
The outcome describes expected positive and negative
consequences of the exchange, whereas the input reflects
the contribution the person must make within the
exchange to earn rewards (Walster, Berscheid, and Walster 1973).
According to equity theory, distributive justice among
exchange partners is achieved when the benefits of each
are proportional to their investments (Adams 1965;
Homans 1961). Thus, a person involved in an exchange
relationship perceives equitable treatment if the ratio of
his or her outcome to input is, in some sense, fair relative to the outcome-to-input ratio of the referent other
(Homans 1961; Homburg, Koschate, and Hoyer 2005).
In an economic exchange situation between a buyer (i.e.,
consumer) and a seller, a product or service becomes the
focus of the exchange. The consumer offers a certain
input (e.g., money, shopping effort) to receive a certain
outcome (i.e., the benefit of the product or service)
(Oliver and Swan 1989). For an equitable deal, consumers seek to adjust their input according to the
expected outcome (Huppertz, Arenson, and Evans
1978; Walster, Berscheid, and Walster 1973). That is,
when they receive a relatively high outcome (e.g., a
greater benefit from the product), in response, they provide a relatively higher input (in terms of money and/or
effort), whereas a relatively lower benefit from the product prompts a relatively lower input. If the outcome-toinput ratio represents, from the consumers point of
view, an equitable deal, they consider the exchange relationship fair, such as a fair product for a fair price
(Huppertz, Arenson, and Evans 1978, p. 251).
Equity theory is particularly appealing for our purposes
because it explicitly considers both the benefit a con-
sumer is likely to obtain for a branded product associated with a particular COO and the sacrifice that he or
she must make to actually receive this benefit. Thus, the
outcome-to-input ratio refers to the comparison of the
expected benefit a consumer obtains from a branded
product that originates from a certain COO and his or
her WTP for that particular product. Because consumers
have different images for different COOs, their evaluations of products originating from the various COOs
also differ (Pappu, Quester, and Cooksey 2007). Bearing
in mind that country image refers to the overall perception consumers form of products from a particular
country, based on their prior perception of the countrys
production and marketing strengths and weaknesses
(Roth and Romeo 1992, p. 480), from a consumers perspective, a product from a COO with a favorable country image is likely to be associated with a higher benefit
than a product from a COO with a less favorable country image.
According to equity theory, consumers seek to establish
an equitable deal, so they adjust the input (WTP) they
provide in the exchange to the outcome they expect to
receive (benefit associated with the product from a given
COO). Therefore, consumers should display a higher
WTP when they receive in exchange a product from a
COO with a favorable country image rather than one
from a COO with a less favorable country image. Thus:
H1: Consumers WTP is higher for a given
branded product that originates from a COO
with a more favorable country image than
one that originates from a COO with a less
favorable country image.
Moderating Role of Brand Familiarity

According to cue utilization theory, consumers use an
array of cues to make product-related inferences in an
attempt to assess a products quality (Olson 1972).
Extrinsic cues constitute attributes that are productrelated but external to the physical product, such as the
COO, the brand name, or the price. In contrast, intrinsic
cues refer to the products inherent attributes that cannot
be modified without changing the physical features of
the product, such as its ingredients. Country of origin
can be considered an extrinsic cue that consumers use to
judge the product offered (Peterson and Jolibert 1995).
Consumers are more inclined to use extrinsic cues when
the intrinsic cues (e.g., performance) are not available or
quality is difficult to judge (Zeithaml 1988). Without
direct experience with the brand, extrinsic cues provide

information consumers can use to form expectations
and evaluations (Tse and Gorn 1993). Therefore, under
conditions of low brand familiarity, a products origin
becomes a more determinant cue (Josiassen, Lukas, and
Whitwell 2008).
However, the expected influence of brand familiarity is
likely to vary depending on whether a purchase situation is low or high involvement. Involvement refers to
the subjective perception of the personal relevance of
an object, activity, or situation (Van Trijp, Hoyer, and
Inman 1996, p. 283). In a low-involvement situation,
consumers are likely to consider an extrinsic cue such as
COO important in their WTP determination, regardless
of whether they are highly familiar with the brand. This
corresponds with heuristic behavior in low-involvement
contexts that supports decision making (Merlo, Lukas,
and Whitwell 2008). The use of an extrinsic cue as a
heuristic helps consumers simplify a decision because it
reduces decision complexity and minimizes cognitive
effort (Verlegh, Steenkamp, and Meulenberg 2005).
Because in a low-involvement situation consumers are
often not motivated to integrate all relevant product
information in their information processing, they tend to
rely on extrinsic cues (e.g., the COO) that can be easily
processed (Chen and Chaiken 1999); the influence of
intrinsic cues is likely to be negligible because their use
requires more time and effort than consumers perceive
as being worthwhile (Zeithaml 1988). Thus:
H2: In a low-involvement setting, brand familiarity does not substantially influence the effect
of COO on consumers WTP.
In a high-involvement setting, both extrinsic and intrinsic cues should become important in product evaluation.
Consumers use of cues as indicators to assess a products
quality may depend on the level of prior knowledge the
consumer disposes of regarding the product (Rao and
Monroe 1988). If the consumer is relatively unfamiliar
with the focal brand, which also means that he or she
cannot revert to intrinsic cues, the use of extrinsic cues
such as the COO should play an important role in the
monetary product evaluation. If, however, the consumer
is highly familiar with the brand, it becomes more likely
that he or she retrieves prior experiences and will use
intrinsic cues along with COO information to assess the
product (Rao and Monroe 1988). Thus, in a highinvolvement situation, the reliance on extrinsic cues such
as the COO should decline in case of high familiarity
with the brand. This leads to the following hypothesis:
H3: In a high-involvement setting, the higher the

consumers brand familiarity, the weaker is
the effect of COO on consumers WTP.
METHOD OVERVIEW
We conduct three complementary experimental studies, using different countries and actual brands as
stimuli. Our first experiment focuses on the investigation
of COO effects for highly familiar and less familiar
brands under conditions of congruencythat is, when
the COO coincides with the home country of the
brand (Hubl and Elrod 1999). Specifically, we employ
a 2 (COO) 2 (brand familiarity) between-subjects
design and use brands that actually originate from the
respective countries. Our second experiment extends
the first experiment and examines the focal relationships in an incongruent conditionthat is, when the
COO and home country of the brand (i.e., the brand
origin) are different. Such incongruence is common in
todays marketplace because the globalization of markets drives numerous companies to consider production shifts to other countries (Funk et al. 2010) in an
effort to stay competitive (Jo, Nakamoto, and Nelson
2003). The new production places are usually countries
consumers would not associate with the brand, and
notably, they often have less positive country images
than the brands home country. While the first two
experiments are both conducted in a low-involvement
setting (mineral water), the third experiment investigates
the impact of COO and brand familiarity on WTP in a
high-involvement setting (sport shoes).2 Finally, we
undertake a follow-up study to Experiment 3, also in a
high-involvement setting (DVD players), to check the
stability of the results.3
All our experiments are separate and self-standing
studies, and we carried them out in the second half of
2008. Each experiment is based on a separate sample
of university students. While this inevitably places limits on the generalizability of the observed effects, the
use of student samples is justified because our focus is
on testing theoretical hypotheses rather than generating representative estimates of consumers absolute
WTP values. In this context, when the researcher is
interested in theoretical explanation, a homogeneous
sample is the preferred option. Lowering intersubject variance in this way enhances the likelihood of
finding support for the theory is true. In such
instances, student samples or other homogeneous
groups are preferred (Sternthal, Tybout, and Calder
1994, p. 208).
EXPERIMENT 1
Experimental Design and Stimuli
Experiment 1 uses a 2 (COO: favorable vs. unfavorable) 2 (brand familiarity: high vs. low) betweensubjects factorial design. The participants, postgraduate business and social sciences students from a wellknown German university, were randomly assigned to
the four experimental groups and received an opportunity to actually buy the branded products in the study.
They also received extra course credit for their participation. The sample consisted of 127 participants;
their average age was 23.6 years, and 70.1% were
female.
We chose mineral water as a product category for two
main reasons. First, it is an everyday consumer good
used by students and nonstudents alike, so the use of a
student sample should not pose a major threat to the
studys external validity (Lynch 1982). Second, the study
participants might be obliged to actually buy the
branded product with their own money (see our description of the BDM procedure), and mineral water is suitable because, in general, it is affordable to anyone. The
choice of a low-value product category follows previous
applications of the BDM approach (e.g., Wertenbroch
and Skiera 2002).
Regarding the choice of specific countries and brands,
we used actual branded products rather than fictitious
alternatives because participants might actually have to
buy the product. For the experimental manipulations,
we needed two countries that, on the one hand, differed
in their country images and, on the other hand, offered
mineral water brands varying in familiarity. Because
German consumers are mainly familiar with mineral
water brands from neighboring European countries, we
selected France as the country with a more favorable
country image and Austria as the country with a less
favorable country image. Using Roth and Romeos
(1992) well-established scale to measure country image
(see the Appendix), a pretest (n = 30) confirmed that
Frances image (MFrance = 5.13) is significantly more
favorable than Austrias (MAustria = 4.43; t(58) = 2.46,
p < .05).
For brand familiarity, we manipulated the experimental
conditions by choosing mineral water brands that actually originate from the two countries. For France, we
selected Evian as the well-known brand and Thonon as
the lesser-known brand. Pretest results (n = 30) revealed
a significant difference in terms of familiarity between
the two brands (Mfamiliar France = 4.46 vs. Munfamiliar France =

1.09; t(58) = 12.72, p < .001). For the brands from Austria, we chose Rmerquelle (high familiarity) and Vslauer (low familiarity). Pretest results also revealed significant differences in brand familiarity (Mfamiliar Austria =
2.32 vs. Munfamiliar Austria = 1.61; t(58) = 1.99, p < .05).
Our experimental manipulation is in line with previous
studies that differentiated between varying levels of
brand familiarity by choosing a highly familiar and an
unfamiliar brand name (e.g., Cordell 1992).
Procedure
For the WTP elicitation, we used the BDM approach
(Becker, DeGroot, and Marschak 1964), which offers
several benefits over other methods of WTP elicitation,
including incentive compatibility and proximity to an
actual act of purchase (Wertenbroch and Skiera 2002).
The incentive-compatible character of this method
prompts consumers to reveal their true WTP and
thereby solves the problem of respondents tendency to
indicate a higher or lower price than their true WTP, as
is the case in hypothetical WTP elicitation formats.
Participants consider a point-of-purchase scenario, in
which they might have to buy and pay for the product,
depending on their stated WTP and a randomly determined selling price. The actual price for the product is
drawn, lottery style, from an urn. The lottery tickets
represent price tags that indicate a range of prices; however, the distribution of prices remains secret to prevent
anchoring effects (Wertenbroch and Skiera 2002). Each
bid (WTP) above or equal to the drawn price forces the
bidder to purchase the product at the price determined
by the lottery. Participants with lower bids are not
allowed to purchase the product, nor are they allowed
to rebid.
To implement the BDM procedure, we first showed the
actual product to the participants in each experimental
group, along with a short product description that
reflected the brand and its associated COO. We next
informed participants of their opportunity to actually
purchase the product for the amount of money they
would be willing to spend to obtain it. We indicated that
the selling price had not yet been fixed and would be
determined randomly at the end of the study, through a
drawing of lots from the urn. Participants also understood that they could not influence the distribution of
prices in the urn. Finally, we asked them for the maximum amount of money they would be willing to pay for
the product. If a participants stated WTP was higher
than or equal to (lower than) the selling price drawn

from the urn, he or she had to (could not) buy the product at that drawn price.
All participants in our study agreed to take part after
they understood the BDM procedure. Furthermore,
none of the participants refused to fulfill their purchase
obligations (in case WTP selling price). These conditions confirm the high criterion validity of the BDM
approach (Wertenbroch and Skiera 2002).
In addition to indicating their WTP, study participants
subsequently completed a questionnaire with measures
of country image (Roth and Romeo 1992) and brand
familiarity (Diamantopoulos, Smith, and Grime 2005),
which enabled us to perform manipulation checks on
the experimental conditions. The questionnaire also
elicited information about potentially relevant covariates identified in previous literature: price consciousness
(Lichtenstein, Ridgway, and Netemeyer 1993), purchase
involvement (Lichtenstein, Bloch, and Black 1988),
brand commitment (Chaudhuri and Holbrook 2001),
and product design (Bloch, Brunel, and Arnold 2003).
As additional control variables, we included measures of
experience with the COO (measured as visits to the
noted countries) and sociodemographic variables (age,
sex, and income). Participants also responded to questions about the realism of the experimental treatments.
Their answers revealed no threats to the studys internal
validity. We provide a description of all the variables
and associated psychometric information based on confirmatory factor analysis (CFA) in the Appendix.
Results
Manipulation Checks. To investigate the validity of the
COO manipulation, we conducted an analysis of variance (ANOVA) with the manipulated COO (France vs.
Austria) as the independent variable and the measured
country image (Roth and Romeo 1992) as the dependent variable. The COO manipulation check showed that
the country image of France is significantly more favorable than that of Austria (MFrance = 4.71, MAustria =
4.09; F(1, 125) = 16.34, p < .001). We used a similar
manipulation check for brand familiarity. As we
expected, the group of well-known brands (French
brand Evian, Austrian brand Rmerquelle; Mfamiliar =
2.88) is much more familiar to consumers than the combination of lesser-known brands (French brand Thonon,
Austrian brand Vslauer; Munfamiliar = 1.22; F(1, 125) =
59.70, p < .001). Thus, the manipulation of both independent variables was successful.
We also tested if the aforementioned control variables

affect consumers WTP. The results showed that only
brand commitment had a (marginally) significant
impact on WTP, and therefore we retained it as a covariate in the subsequent analysis.
Test of Hypotheses. We ran an analysis of covariance
(ANCOVA) with WTP (derived from the BDM procedure)
as the dependent variable, COO and brand familiarity as
factors, and brand commitment as a covariate. Country of
origin had a significant main effect (F(1, 122) = 7.52, p <
.01), in support of H1. As Figure 1 shows, respondents
are willing to pay a higher price for a brand originating
from France (COO with a more favorable country
image) than for a brand originating from Austria (COO
with a less favorable country image); the mean WTP for
a brand from France is 1.02 euros, whereas that for a
brand from Austria is only .77 euros. The strength of the
main effect reveals that COO has a notable influence on
WTP (partial h2COO = .06), which corresponds to a
medium effect size (Cohen 1988).
Regarding H2, we found no evidence that brand familiarity moderates the effect of COO on WTP, as indicated
by the nonsignificant interaction term (F(1, 122) = .15,
p = .70). That is, the COO influences a consumers WTP,
regardless of familiarity with the brand in a lowinvolvement setting. Finally, the covariate brand commitment revealed a marginally positive impact on WTP.4
In Figure 2, we display the price response functions per

experimental treatment. Consistent with H1, the price
response function for the favorable country image
(France) is associated with higher WTP values than the
function with the less favorable country image (Austria).
EXPERIMENT 2
In Experiment 2, we extend and validate the findings of
Experiment 1 under conditions of incongruity between
the COO and the home country of the brand. We again
use a 2 (COO: favorable vs. unfavorable) 2 (brand
familiarity: high vs. low) between-subjects factorial
design and apply it to the same product category as in
Experiment 1, that is, mineral water. In the current context, a situation of incongruity exists when the company
decides to use sources (i.e., water springs) and bottling
plants in another country than the brands home country.
To manipulate the COO and brand familiarity, we
retained France as the COO with a more favorable country image with Evian as the familiar and Thonon as the
unfamiliar brands. For the COO with a less favorable
country image, we chose Turkey and kept the same two
brands that were used for France. Therefore, Turkey represents the incongruent setting because the COO is not
the same as the home country of the focal brands.
Figure 1. Experiment 1: Means of WTP by Experimental Condition

1.15
1.10
1.09 (.09)
WTP (in Euros)
1.05
1.00
.95
.95 (.09)
High brand
familiarity
.90
.85
.80 (.09)
.80
.75
.73 (.09)
.70
Favorable Country Image
Less Favorable Country
(France)
Image (Austria)
COO
Notes: Standard deviations are in parentheses.
Low brand
familiarity
Figure 2. Experiment 1: Price Response Functions per Experimental Treatment

A: COO
Relative Number of Consumers

(Cumulative)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
.00
.40
.80
1.20
1.60
2.00
2.40
2.80
3.20
2.40
2.80
3.20
WTP (in Euros)

France
Austria
B: Brand Familiarity

(Cumulative)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
.00
.40
.80
1.20
1.60
2.00
WTP (in Euros)

High brand familiarity
Low brand familiarity
A pretest (n = 30) using Roth and Romeos (1992)

scale verified the different perceptions of the two
countries in terms of country image, showing that the
country image of France (MFrance = 5.13) is significantly more favorable than that of Turkey (MTurkey =
2.77; t(58) = 9.47, p < .001). To conduct the experi-
ment, we used a new sample of 129 postgraduate

business and social sciences students who were randomly allocated to the four experimental groups. The
average age of participants was 23.5 years, and 55%
were female. We also used the same procedure (i.e.,
BDM method) to elicit WTP values and the same
multi-item scales as in Experiment 1 to measure our

variables (see the Appendix).
Results
Manipulation Checks. To investigate the validity of the
COO manipulation, we conducted an ANOVA with the
measured country image (Roth and Romeo 1992) as the
dependent variable. Respondents evaluated Frances
country image much more favorably (MFrance = 4.70)
than Turkeys (MTurkey = 2.82; F(1, 127) = 164.01, p <
.001). We used a similar manipulation check for brand
familiarity, running an ANOVA between the two brands
(Evian vs. Thonon). As we expected, Evian enjoys much
higher brand familiarity among respondents (Mfamiliar =
4.14) than Thonon (Munfamiliar = 1.16; F(1, 127) =
265.33, p < .001). Thus, the manipulation of the two
independent variables of interest was successful.
As in Experiment 1, an analysis of the control variables
revealed that, apart from brand commitment, none of
them had any significant impact on WTP. Therefore, we
retained brand commitment, whereas we dropped the
other control variables from further analysis.
Test of Hypotheses. We again used an ANCOVA with
WTP as the dependent variable, COO and brand familiarity as factors, and brand commitment as a covariate.
We found a significant main effect of COO on WTP
(F(1, 124) = 11.30, p < .01). Specifically, as Figure 3

shows, respondents display a higher WTP for a product
from a COO with a more favorable country image
(MFrance = .99 euros) than for the same product from a
COO with a less favorable country image (MTurkey = .76
euros). This provides further support for H1. The
strength of the main effect reveals that the COO has a
considerable influence on WTP (partial h2COO = .08),
which corresponds to a medium to large effect size
(Cohen 1988).
Regarding our second hypothesis, the interaction effect
between COO and brand familiarity was not significant
(F(1, 124) = .62, p = .43), again indicating no moderating role of brand familiarity in a low-involvement setting. Regarding the covariate, brand commitment
revealed a positive impact on WTP (F(1, 124) = 10.44,
p < .01).5 Figure 4 shows the relevant price response
functions.
Unlike in Experiment 1, in which the COO and the home
country of the brand are the same and thus interpretation
of the COO effect on WTP is straightforward, here the significant effect of COO on the outcome variable might be
explained by the differences in country image and/or the
differences in congruity (Hubl and Elrod 1999). In an
attempt to isolate a potential incongruity effect, we first
run a regression analysis with WTP as the dependent
variable and the measured country image as the predictor.

1.15
1.10
WTP (in Euros)
1.05
1.00
.95
1.02 (.07)
.97 (.07)
High brand
familiarity
.90
.85
Low brand
familiarity
.80
.79 (.07)
.75
.74 (.07)
.70
Favorable Country Image Less Favorable Country
(France)
Image (T
(Turkey)
Turkey)
urkey)
COO
Figure 4. Experiment 2: Price Response Functions per Experimental Treatment

A: COO

(Cumulative)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
.00
.40
.80
1.20
1.60
2.00
2.40
2.80
3.20
WTP (in Euros)

France
Turkey

(Cumulative)
B: Brand Familiarity
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
.00
.40
.80
1.20
1.60
2.00
2.40
2.80
3.20
WTP (in Euros)

High brand familiarity
In a second step, we extracted the (unstandardized) regression residuals and used them in a t-test analysis of the congruent and incongruent conditions. Because the t-test
revealed no significant difference between the congruent
COOcountry-of-brand condition (France) and the incongruent COOcountry-of-brand condition (Turkey) (t(127)
= .78, p = .44), no incongruity effect can be identified.
Thus, the observed COO effect on WTP is solely attributable to the difference in country images, whereas congruity does not seem to play a role.
Low brand familiarity
EXPERIMENT 3
Experiment 3 examines the impact of COO on WTP in a
high-involvement setting and further tests the moderating
influence of brand familiarity, as described in H3. Because
the issue of a production shift to another country is particularly relevant in the case of high-involvement products, we conduct Experiment 3 under conditions of incongruity between the COO and the brands home country.
We chose sports shoes as a high-involvement product

category for several reasons. First, consumers usually
take interest when buying such a product because the
performance of the shoes during sports activities is a
critical issue. Second, sports shoes are a widely used
product bought by many types of consumers (both male
and female consumers, both students and nonstudents).
Third, the products value should be in line with most
peoples budgets, and a reasonable price range can be
expected in response behavior. Fourth, several previous
studies have identified sport shoes as high-involvement
products (e.g., Quester and Lim 2003).
Using Zaichkowskys (1994) scale, we measured product involvement with four items that refer to the perceived importance, relevance, and valuation of the
product. A pretest subsequently revealed that participants are significantly more involved with sports shoes
(M sports shoes = 5.08) than with mineral water
(Mmineral water = 4.17; t(505) = 6.77, p < .001).
Similar to Experiment 2, we employed a 2 (COO: favorable vs. unfavorable) 2 (brand familiarity: high vs.
low) between-subjects factorial design. A total of 251
participants, undergraduate students from a well-known
German university, participated in the study and were
randomly allocated to one of the four experimental
groups. Participants were business and social sciences
students; their average age was 23.4 years, and 55.8%
were female. We used lottery winnings as incentives.
For the manipulation of the COO, we selected the United
States as the COO with a favorable country image and
South Korea as the COO with a less favorable country
image. Several previous studies provide evidence that the
images of the two countries differ significantly from each
other (e.g., Ahmed and dAstous 2008). For the manipulation of brand familiarity, we distinguished between
Nike as the well-known brand of sports shoes and
Brooks as the lesser known brand. The Unites States is
the home country of both brands in terms of headquarters location and therefore represents the congruent condition; we used the same brands, but made in South
Korea, to create the incongruent condition.
Procedure
Participants received a questionnaire that presented a
short scenario that varied over the experimental treatment conditions. They were told to imagine that they
made up their mind to do more sports, such as running,
going to the gym, or the like, and therefore were plan-
ning to buy new sports shoes. The shoes were presented

in a picture, and the brand and COO were included in
the products description. Participants then indicated
their WTP for the product.
Unlike in Experiments 1 and 2, we could not apply the
BDM method in Experiment 3 because it is only suitable
for inexpensive products (Wertenbroch and Skiera
2002). In the case of more expensive products (e.g.,
sport shoes), it is not realistic to expect consumers to
actually purchase the product on the spot because of
the financial outlay involved. Thus, we turned to contingent valuation (Mitchell and Carson 1989) and asked
respondents directly to state their WTP. Compared with
BDM, contingent valuation is a less satisfactory
approach for measuring WTP (Miller et al. 2011;
Wertenbroch and Skiera 2002). We address this issue
when we discuss the testing of the hypotheses.
In addition to revealing their WTP, participants completed the same questions as in Experiments 1 and 2; we
also included acquired product knowledge through
product experience (Roehm and Sternthal 2001) as an
additional control variable to account for possible differences due to varying expertise (for measurement
details, see the Appendix).
Results
Manipulation Checks. To perform checks on the COO
manipulation, we conducted an ANOVA with the measured country image as the dependent variable. The
results revealed that the country image of the United
States (MUSA = 4.76) is significantly more favorable
than the country image of South Korea (MSouth Korea =
3.56; F(1, 249) = 87.82, p < .001).
We conducted a similar manipulation check on brand
familiarity. Consistent with our expectations, the results
showed that Nike is a highly familiar brand (Mfamiliar =
5.15) among respondents compared with Brooks
(Munfamiliar = 1.52; F(1, 249) = 726.80, p < .001). Thus,
as in Experiments 1 and 2, the manipulation of both
independent variables was successful.
Test of Hypotheses. Empirical evidence shows that contingent valuation is afflicted by overestimations in
response behavior (Neill et al. 1994; Vlckner 2006).
Hypothetical settings that offer no consequences for
participants decisions do not sufficiently motivate
respondents to reveal their true preferences: What
participants say they would do in hypothetical situa-
tions might not necessarily correspond to what they

actually do (Ding, Grewal, and Liechty 2005). If there is
no purchase obligation, WTP estimates exceed the
actual WTP (Vlckner 2006); thus, consumers WTP is
significantly higher in a hypothetical purchase situation
than in a real one (Neill et al. 1994).
Strategic response behavior provides a further explanation because respondents might overstate (or understate) their true WTP when they believe that their
response has an influence on the actual product offering
(or on the products price) (Wang, Venkatesh, and Chatterjee 2007). Unfortunately, extant research does not
provide an answer on how to handle the problem that
WTP values from a hypothetical payment context are
likely to differ from WTP estimates elicited with an
actual purchase commitment (Vlckner 2006). Nevertheless, even though an open-ended question format
generates a hypothetical bias when asking respondents
directly for their WTP, such an approach still has the
potential to forecast an accurate demand curve (Miller
et al. 2011).
Bearing the preceding discussion in mind and given that
we directly asked respondents for their WTP in Experiment 3, we are aware of the overestimation in WTP that
is likely to occur. To take this critical point into consideration, we treated the reported WTP estimates as having only rank (ordinal) data quality and used a nonparametric statistical method (Kruskal-Wallis ANOVA) to
test our hypotheses. Nonparametric statistical tests are
less restrictive in their requirements toward the data.
Our data show skewed and tailed distributions within
groups that result from extreme scores caused from the
open-ended character of the WTP measurement. In this
case, the Kruskal-Wallis test is actually more powerful
than the F-test of the AN(C)OVA.
With regard to the COO main effect, the KruskalWallis test results revealed that consumers WTP is significantly affected by the COO (H(1) = 4.03, p < .05). This
supports H1. Furthermore, Jonckheeres test shows a significant trend in the data, such that the less favorably the
country image of a COO is evaluated, the more the
median WTP decreases (J = 6725.5, z = 2.01, r = .13).
Regarding the interaction effect, H3 postulated that in a
high-involvement setting, the COO effect on WTP
declines with increasing brand familiarity. To investigate
the COO brand familiarity interaction, we simultaneously compared all four experimental conditions; the
corresponding Kruskal-Wallis test revealed a significant
difference between the experimental treatment groups

(H(3) = 13.81, p < .01).
To discover which of the experimental treatment groups
differ significantly from one another, we subsequently
conducted Mann-Whitney tests. To avoid inflation of a
Type I error, we applied a Bonferroni correction, resulting in a significance level of .008. The results show that
only one group (less favorable COO/low brand familiarity) significantly differs from the rest (for comparison
with favorable COO/high brand familiarity, U = 1392.5,
p < .008, z = 2.90, r = .26; for comparison with less
favorable COO/high brand familiarity, U = 1318.5, p <
.008, z = 3.15, r = .28; for comparison with favorable
COO/low brand familiarity, U = 1313.5, p < .008,
z = 3.05, r = .27). The effect sizes r indicate small to
medium effect sizes for all three comparisons. The other
three experimental treatment groups (favorable
COO/high brand familiarity, less favorable COO/high
brand familiarity, favorable COO/low brand familiarity) do not differ significantly from one another.
Thus, our analysis reveals a significant interaction effect
of COO and brand familiarity. Specifically, the results
indicate a COO effect in case of low brand familiarity
(because there is a significant difference between the less
favorable COO/low brand familiarity and favorable
COO/low brand familiarity conditions) and an effect of
brand familiarity in case of a COO with a less favorable
image.6 Thus, H3 is supported. Figure 5 shows the mean
WTP values for the different experimental conditions.
Note that care needs to be exercised when interpreting
the absolute WTP values depicted in the Figure because,
as we already noted, the contingent valuation approach
applied in Experiment 3 tends to overestimate respondents WTP.
Following the same procedure as in Experiment 2 to
identify a potential congruity effect, we found no difference between the congruent COOcountry-of-brand
condition (United States) and the incongruent
COOcountry-of-brand condition (South Korea)
(t(249) = .44, p = .66). In line with Experiment 2, we can
conclude that the COO effect on WTP is attributable
only to the difference in country images and that congruity does not play a role.
Finally, common method variance should not cause a
problem in this experiment, despite the self-reported
nature of the dependent variable (WTP). We measured
WTP before the assessment of the covariates to avoid
the possibility of biasing the measurement of the

85
83
81.51 (4.04)
4.04)
81.02 (4.04)
WTP (in Euros)
81
79
77
78.21 (4.05)
High brand
familiarity
75
73
Low brand
familiarity
71
69
67
66.59 (4.17)
4.17)
65
Favorable Country Image
Less Favorable Country
(United States)
Image (South Korea)
COO
dependent variable. In addition, we used different measurement formats for our variables (Podsakoff et al.
2003). Finally, we employed Lindell and Whitneys
(2001) approach using the smallest observed correlation among the manifest variables as a proxy for common method variance (Podsakoff et al. 2003, p. 893).
All significant correlations between the covariates and
WTP remained significant after this adjustment, providing no evidence for common method variance.
Follow-Up to Experiment 3
One issue with Experiment 3 is that the more familiar
brand also comes from the country with the stronger
country image. Thus, the question arises whether we
would obtain a similar pattern of results if we were to
study a strong, familiar brand but from a weak COO.
To address this issue, we conducted an additional follow-up study on a high-involvement product category
(DVD players), in which we focused on a strong and
well-known brand (Samsung) that originates from a
country with a relatively poor country image (South
Korea). For the lesser-known brand, we selected another
South Korean brand, namely, LG Electronics. As in
Experiment 3, we chose the United States as the COO
with the more favorable country image to compare it
with South Korea. The sample consisted of 219 business
and social sciences students; their average age was 21.6
years, and 58.4% were female. Manipulation checks
confirmed that Samsung is more familiar (Mfamiliar =

4.80) to respondents than LG (Munfamiliar = 3.52; F(1,
217) = 54.52, p < .001).
Consistent with Experiment 3, the results show that
brand familiarity moderates the COO effect on WTP.
Specifically, a Kruskal-Wallis test reveals that the experimental treatment groups differed significantly from
each other (H(3) = 12.49, p < .01). Subsequently, MannWhitney post hoc tests confirm the existence of a COO
effect for the less familiar brand (U = 739, p < .008, z =
2.89, r = .30) but not for the more familiar brand.7
DISCUSSION AND CONCLUSIONS

With equity theory as a theoretical foundation, our
experimental studies reveal that consumers are willing
to pay higher prices for branded products from a COO
with a favorable country image than for products from
a COO with a less favorable image (e.g., for products
from France vs. Austria or products from the United
States vs. South Korea). In addition, we controlled for
potential incongruity effects, which did not show any
impact on consumers WTP. Thus, the driving force that
explains the COO effect is the country image, not
whether the COO coincides with the brands home
country. These findings extend the fields knowledge of
the impact of COO in several ways.
First, our research adds to existing literature that

focuses mainly on the influence of COO on product
evaluations and purchase intentions. However, the theoretical rationale underpinning COO effects is often not
elaborated, and indeed, the absence of a theory or
sound conceptual frameworks have been the hallmark
of a large number of CO studies (Samiee 2011, p. 476).
With the application of equity theory, we introduce a
new conceptual basis that further develops our theoretical understanding of COO effects by explicitly considering both the benefits and the sacrifices associated with
obtaining a branded product from a particular COO.
Our findings show that consumers not only prefer and
assign a higher value to branded products from a COO
with a favorable country image but also, consistent with
equity theory, are willing to spend more money to
obtain them. Therefore, one of the main theoretical contributions of this study stems from monetizing the
COO effect (Nebenzahl and Jaffe 1993) through the
application of equity theory.
Second, in a low-involvement setting, our findings are
based on the application of a WTP elicitation method
(BDM) that is notable for its incentive-compatible
approach. This approach ensures that respondents
will reveal their true WTP and not overestimate or
understate the maximum price they would be willing
to pay. Surprisingly, the BDM method had not been
used previously in a COO context; this study indicates
that it offers a promising procedure for empirical
investigations seeking to link COO to price-related
outcomes.
Although in the high-involvement setting (Experiment
3) we had to rely on the less reliable contingent evaluation method for WTP elicitation purposes, we do not
consider this a major shortcoming of our study. This is
because our focus was on a comparison of WTP across
countries and brand familiarity levels (to enable a test
of H3) rather than on an estimation of absolute WTP
levels for the brands concerned. Any overestimation of
WTP generated by contingent valuation would apply
across all experimental conditions and, therefore, not
greatly influence comparisons between them. In this
context, recent evidence indicates that price response
functions obtained using the BDM method have a
comparable shape to those derived from the contingent
valuation approach (Miller et al. 2011). The fact that
we adopted a conservative approach and treated the
WTP data as ordinal further helped overcome the limitations of contingent valuation in the current study.
Third, we offer important insights into the price-related

consequences of COO for different levels of consumer
brand familiarity. In previous studies, brand familiarity
has emerged as a relevant factor in the use of extrinsic
cues, such as COO (Cordell 1992; Jo, Nakamoto, and
Nelson 2003). Our study tests explicitly whether a consumers familiarity with a brand dilutes the strength of
the COOs impact on his or her WTP. While, as
expected, we do not observe a moderating role of brand
familiarity in a low-involvement setting (Experiments 1
and 2), we do in a high-involvement setting (Experiment
3). In the latter case, in which consumers have a greater
interest in and thus are more involved with the product
category, they rely on extrinsic cues such as the COO
only if they are relatively unfamiliar with the brand. As
consumers become more familiar, they become more
likely to use intrinsic cues rather than extrinsic cues and
base their WTP on previous experiences with the brand.
Indeed, as Experiment 3 and its follow-up study show,
in a high-involvement setting, WTP for highly familiar
brands is not materially affected by the COO.
Fourth, of the several control variables we included in our
analysis, brand commitment exhibited a positive influence on consumers WTP determination in all three
experiments. This finding supports previous research suggesting that consumers with a strong and favorable brand
attitude are willing to pay a price premium (Chaudhuri
and Holbrook 2001). From a companys perspective, it is
therefore worthwhile to take the extent of a consumers
brand commitment into account and improve it, because
consumers reveal higher WTP as their attachment to the
brand increases. Regarding consumer price consciousness, we find no influence on WTP in Experiments 1 and
2, likely because mineral water is a product of low outlay
and low involvement. However, price consciousness
exhibited a negative impact on WTP in Experiment 3
(sport shoes). This finding corresponds with the results of
Lichtenstein, Bloch, and Black (1988), who show, using
the same product category we used in Experiment 3, that
price consciousness negatively affects the price acceptability level and the width of the acceptable price latitude.
Fifth, regarding the ongoing debate in the literature
about the relevance of COO as an influence on consumer
decision making (e.g., Josiassen and Harzing 2008;
Samiee 2011; Usunier 2006), our results emphasize its
importance as a consumer behavior cue. We empirically
support the view that the COO cue influences not only
consumers perceptions but also their actions: In general,
consumers will spend more money for a branded product from a COO with a more favorable country image.
In two of our studies, this result emerges from a relatively realistic buying situation in which participants
actually fulfilled the purchase act. This shows that the
COO effect does not disappear when actual purchase
behavior (in terms of real WTP) is the dependent
variable, rather than softer measures such as reported
attitudes and buying intentions.
Further research should try to replicate our findings
using other COOs and product categories as stimuli, as
well as respondents from different countries. For example, the strength of the COO impact as an informational
cue on consumers WTP may depend on the respondents
country or culture. Comparative research seeking to
identify such cross-national or cross-cultural differences
would be most welcome. Similarly, the extent to which
the COO impact on WTP is moderated by the product
type involved (e.g., utilitarian vs. hedonic) or the perceived globalness/localness of the brand (Steenkamp and
De Jong 2010) is also open to investigation. Replications
and/or extensions of our study using nonstudent samples
would also enhance the external validity and generalizability of our findings. Although Experiments 1 and 2
have been conducted under relatively realistic conditions
in which respondents actually had to pay for the product, they were still carried out in a laboratory setting.
Field study replications to validate our findings would
therefore be highly desirable. In such field studies, the
impact of environmental conditions (e.g., the availability
of substitute products) could also be studied when
assessing consumers WTP. Moreover, it would be worthwhile examining whether and how the COO effect on
WTP changes over time as a result of changes in country
image perceptions. Economic (e.g., economic crisis in
Greece), political (e.g., uprising in Egypt), and even natural events (e.g., earthquakes in Japan) can all be expected
to affect consumers images of countries and, in turn,
those of their products; as a result, consumer response
variables (e.g., WTP) may also be affected. Finally, attention to price-related outcomes other than WTP would
provide insights complementary to those generated in the
current study. Price sensitivity, perceived price fairness,
and price search behavior just are some examples of
variables that could be studied in conjunction with COO
and for which extant knowledge is limited.
MANAGERIAL IMPLICATIONS
From a managerial point of view, our findings hold
interest for international marketers in several respects.
First, if COO is a major factor that consumers take into
account when they make a decision about the maximum amount of money they are willing to spend on a
branded product, managers can use this information in
their pricing decisions. If their brand originates and is
produced in a country with a good reputation and
image, the implementation of a premium pricing
strategy should be easier because consumers WTP is
also likely to be higher. Although this suggestion might
appear intuitive, attitudes and behavior often differ,
and it is only through empirical support (such as that
offered by the current study) that one can determine
whether this is likely to be the case.
Second, communication activities about the COO can
facilitate pricing policies such as price differentiation. If
the firm finds itself in the fortunate position of benefiting from a favorable COO image, it should emphasize
the notion of COO in its communication strategyfor
example, by calling attention to the COO during
advertising activities or on the package design. With
such measures, consumers should notice and process
the COO as an informational cue, which in turn
should enhance their WTP. For example, in an interview with the Financial Times, the chief executive officer of the luxury group Tods stated the following
when being asked whether the Made in Italy label
will retain its luster: Yes, because it is still the maximum guarantee of high quality products such as ours.
Like the French for perfume, the Swiss for watches.
We have the hundreds, the thousands, of family firms,
micro-enterprises, almost a Renaissance model, that
guarantee that quality. Thats not easy to copy (Aspden 2011).
Conversely, if the brand is linked to a less favorable
COO image, the firm should highlight other product
attributes, rather than the COO, in its communication
strategy (Verlegh, Steenkamp, and Meulenberg 2005).
However, in deciding whether to emphasize the COO,
managers should also consider the product category. In
a low-involvement setting, our results indicate that an
accentuation of the COO seems to be promising. For a
high-involvement setting, however, it is advisable to
prime the COO within marketing activities, especially
if consumers are relatively unfamiliar with the brand.
Third, at a broader strategic level, the effect of COO on
consumers WTP, as shown in Experiments 2 and 3, indicates the need for caution in decisions about a change in
COO. In this context, the inability to identify an incongruity effect suggests that a discrepancy between the home
country of the brand and the country of production is not
necessarily problematic. However, relocating plants or

production facilities to a COO with a less favorable country image for the sake of cost savings should be weighed
against the possible margin losses that may result from the
lower WTP that also may result from the move. For example, Steiff, the German producer of plush toys, restored
production in Germany after outsourcing it to China for a
few years. Bringing the brand back to its home country
(Wiesmann 2008), the company is likely to benefit from a
higher WTP among potential customers given the much
better country image of Germany in relation to China. In
a similar vein, if a company is envisaging a foreign partnership, it should explicitly consider the extent to which
this cooperation may have repercussions (positive or negative) on its customers WTP. This issue is particularly
important for low-involvement products and for highinvolvement products that do not enjoy high familiarity
among customers.
Finally, consumers increasingly demand and are more
aware of sustainable production, which includes environmental as well as ethical issues. Sustainability is a
major topic for internationally operating companies and
is often anchored in their strategy; the provenance of the
product can play a role with respect to the logistical outlay, conditions of employment or eco-friendly production. In Germany, for example, consumers increasingly
tend to buy local and regional products (positive image
of local/regional area that consumers can trust, avoidance of long-distance shipments, and so on play a role
in this regard). Similarly, with respect to ethical and ecofriendly concerns, some countries have better images
related to stricter laws and conditions than others. Some
Asian countries, for example, allow a much cheaper but
also less ethical and eco-friendly production and have
the respective (negative) reputation for it. Thus, the
provenance of the product has the potential to reassure
consumers decisions to make a greater investment to
obtain a product they can trust. In other words, the
COO can represent a unique selling proposition for
which consumers are willing to pay.
In conclusion, our findings demonstrate that COO not
only affects what consumers are likely to buy (as repeatedly shown in prior research) but also how much they
are willing to pay. As we outlined, practitioners will
consider this finding highly relevant, while researchers
should view our study as a springboard into further
investigations of the price-related consequences of COO
effects.
NOTES
1. Operating income is defined as total revenues from
operations minus cost of goods sold and operating
costs (excluding interest expense and income taxes)
(Horngren, Datar, and Rajan 2012, p. 64). Operating
income differs from net income in that the latter also
takes nonoperating benefits (e.g., interest revenue)
into account from which nonoperating costs (e.g.,
interest) and income taxes are deducted (Horngren,
Datar, and Rajan 2012, p. 92).
2. Common method bias, which often arises when the
same respondent offers assessments of both the independent and the dependent variables (Podsakoff et al.
2003), does not pose a problem in Experiments 1 and
2. Unlike survey-based designs, we manipulate both
independent variables (i.e., COO and brand familiarity) experimentally instead of measuring them, and
respondents only provide data on the dependent
variable (WTP).
3. We conducted this follow-up study on the suggestion
of an anonymous reviewer, whom we would like to
thank.
4. Our analysis of the statistical power of the applied
ANCOVA model reveals a power value of .86 (a =
.05), which exceeds the recommended value of .80
(Cohen 1988).
5. Our analysis of the statistical power of the applied
ANCOVA model reveals a power value of .99 (a =
.05), which well exceeds the recommended value of
.80 (Cohen 1988).
6. We found the interaction effect of COO and brand
familiarity to be significant when examined with
ANCOVA (F(1, 243) = 5.04, p < .05). Regarding the
covariates, price consciousness (negative) (F(1, 243) =
6.99, p < .01), brand commitment (positive) (F(1,
243) = 4.38, p < .05), and product design (positive)
(F(1, 243) = 11.14, p < .01) revealed significant
effects on WTP.
7. We obtained the same results when we applied an
ANCOVA (F(1, 214) = 8.20, p < .01). In terms of
covariates, the latter revealed a significant negative
influence of price consciousness (F(1, 214) = 11.69,
p < .01).
Country image is the overall

perception consumers form of
products from a particular
country, based on their prior
perception of the countrys
production and marketing
strengths and weaknesses.
(Roth and Romeo 1992,
p. 480)
Brand familiarity reflects the

extent of a consumers direct
and indirect experience with a
brand. (Campbell and Keller
2003, p. 293)
Brand
familiarity (+)
Conceptualization
Country
image (+)
Variable
(Assumed
Influence on
WTP)
Appendix. Constructs and Items
Five items on a seven-point semantic differential scale:

1. 1 = unfamiliar, and 7 = familiar
2. 1 = inexperienced, and 7 = experienced
3. 1 = not knowledgeable, and 7 = knowledgeable
4. 1 = uninformed, and 7 = informed
5. 1 = novice buyer, and 7 = expert buyer
Source: Diamantopoulos, Smith, and Grime (2005)
Four items on a seven-point bipolar semantic differential

scale:
1. How would you rate innovativeness of products from
[COO]? Innovativeness designates the use of new technology and engineering advances. (1 = not innovative,
and 7 = innovative)
2. How would you rate the attractiveness of the design of
products from [COO], regarding appearance, style, colors,
and variety? (1 = no attractive design, and 7 = attractive design)
3. How would you rate the prestige of products from [COO],
including their exclusivity, status, and brand name reputation? (1 = low prestige, and 7 = high prestige)
4. How would you rate the workmanship of products
from [COO], which comprises reliability, durability, craftsmanship, and manufacturing quality? (1 = bad workmanship, and 7= good workmanship)
Source: Roth and Romeo (1992)
Measurement
.81/.87/.86
.95/.96/.97
.81/.86/.86
.92/.94/.97
Cronbachs a
Construct
Reliability
.80/.84/.87
.52/.63/.61
Average
Variance
Extracted
Three items on a seven-point Likert-type scale (1 = strongly

disagree, and 7 = strongly agree)
1. I choose my [product] very carefully.
2. Which [product] I use matters to me a lot.
3. Choosing a [product] is an important decision to me.
Source: Mittal and Lee (1988)
Three items on a seven-point Likert-type scale (1 = strongly
1. I consider myself to be highly loyal to [brand name].
2. I would generally purchase [brand name] even when
another brand is on sale.
3. I would recommend [brand name] to others.
Source: Ahluwalia, Unnava, and Burnkrant (2001), Chaudhuri
(1999)
The level of perceived personal relevance or importance

a consumer attaches to a
product or brand during
choice processes. (Mittal and
Lee 1988)
The construct refers to the

pledging and binding of a
consumer to a brand choice
within a product class; thus, it
describes an emotional or psychological attachment to a
brand. (Ahluwalia, Unnava,
and Burnkrant 2001)
Purchase
involvement
Brand
commitment
Four items on a seven-point Likert-type scale (1 = strongly

1. I usually buy products when they are on sale.
2. I buy the lowest priced product that will suit my needs.
3. When it comes to choosing a product for me, I rely heavily
on price.
4. Price is the most important factor when I am choosing a
brand.
Source: Lichtenstein, Bloch, and Black (1988)
Measurement
Price consciousness refers to

the degree to which the consumer focuses exclusively on
paying a low price. (Lichtenstein, Ridgway, and Netemeyer 1993, p. 235)
Conceptualization
Price
consciousness
Covariates
Variable
(Assumed
Influence on
WTP)
Appendix. Continued
.79/.80/.78
.90/.91/.89
.85/.87/.77
Cronbachs a
.80/.81/.79
.91/.91/.89
.87/.88/.79
Construct
Reliability
.57/.59/.56
.76/.78/.73
.64/.65/.50
Average
Variance
Extracted
The construct refers to the

knowledge, experience and
expertise a consumer disposes
with respect to a particular
product. (Alba and Hutchinson 1987)
Visit to the country
Product
experience
Experience
with COO
Have you ever been to [COO]? (yes/no)
Five items on a seven-point semantic differential scale

1. How often do you use [product]? (1 = never, and 7 =
permanently)
2. How familiar are you with [product]? (1 = unfamiliar,
and 7 = familiar)
3. How well-acquainted do you consider yourself with
[product]? (1 = not at all acquainted, and 7 = very well
acquainted)
4. How much of an expert would you call yourself regarding
[product]? (1 = novice, and 7 = expert
5. How regularly do you use [product]? (1 = intermittently,
and 7 = regularly)
Source: Roehm and Sternthal (2001)
Four items on a seven-point semantic differential scale

1. 1 = unappealing, and 7 = appealing
2. 1 = not likeable, and 7 = likeable
3. 1 = ordinary, and 7 = unique
4. 1 = commonplace, and 7 = original
Source: Dahl, Chattopadhyay, and Gorn (1999)
Measurement
N.A./N.A./.94
.89/.89/.89
Cronbachs a
N.A./N.A./.94
.90/.88/.87
Construct
Reliability
N.A./N.A./75
.70/.65/.65
Average
Variance
Extracted
Notes: Cronbachs a, construct reliability, and average variance extracted values relate to Experiments 1, 2, and 3 respectively. N.A. = not applicable. CFA model fit was as follows: Experiment 1: c2(215) = 384.55,
RMSEA = .079, and CFI = .936. Experiment 2: c2(215) = 407.62, RMSEA = .084, and CFI = .930; Experiment 3: c2(329) = 976.46, RMSEA = .089, and CFI = .926.
The visual product esthetics

that create a products appearance in terms of color, size,
shape, proportion, pattern,
and so forth. (Bloch, Brunel,
and Arnold 2003)
Conceptualization
Product design
Variable
(Assumed
Influence on
WTP)
Appendix. Continued
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Are Consumers Really Willing to Pay

More for a Favorable Country Image?

ne of the oldest and most persistent concerns in

Nicole Koschate-Fischer is Professor of Marketing (e-mail:

reviews of COO research, see Jaffe and Nebenzahl

Country-of-Origin Effects and Willingness to Pay 19

and not quality perceptions, serve as a dependent

20 Journal of International Marketing

made-in, which may or may not coincide with the

countries may cause demand effects (Johansson 1989).

WTP as a Dependent Variable

Country-of-Origin Effects and Willingness to Pay 21

We believe that such additional insights can be expected

22 Journal of International Marketing

research (Usunier 2006). Indeed, our focus on WTP is

THEORETICAL BACKGROUND AND

Moderating Role of Brand Familiarity

direct experience with the brand, extrinsic cues provide

Country-of-Origin Effects and Willingness to Pay 23

H3: In a high-involvement setting, the higher the

24 Journal of International Marketing

the two brands (Mfamiliar France = 4.46 vs. Munfamiliar France =

than or equal to (lower than) the selling price drawn

Country-of-Origin Effects and Willingness to Pay 25

We also tested if the aforementioned control variables

In Figure 2, we display the price response functions per

Figure 1. Experiment 1: Means of WTP by Experimental Condition

WTP (in Euros)

26 Journal of International Marketing

Figure 2. Experiment 1: Price Response Functions per Experimental Treatment

Relative Number of Consumers

WTP (in Euros)

Relative Number of Consumers

WTP (in Euros)

A pretest (n = 30) using Roth and Romeos (1992)

ment, we used a new sample of 129 postgraduate

Country-of-Origin Effects and Willingness to Pay 27

multi-item scales as in Experiment 1 to measure our

(F(1, 124) = 11.30, p < .01). Specifically, as Figure 3

Figure 3. Experiment 2: Means of WTP by Experimental Condition

28 Journal of International Marketing

Figure 4. Experiment 2: Price Response Functions per Experimental Treatment

Relative Number of Consumers

WTP (in Euros)

Relative Number of Consumers

WTP (in Euros)

Low brand familiarity

Country-of-Origin Effects and Willingness to Pay 29

We chose sports shoes as a high-involvement product

30 Journal of International Marketing

ning to buy new sports shoes. The shoes were presented

tions might not necessarily correspond to what they

difference between the experimental treatment groups

Country-of-Origin Effects and Willingness to Pay 31

Figure 5. Experiment 3: Means of WTP by Experimental Condition

WTP (in Euros)

32 Journal of International Marketing

confirmed that Samsung is more familiar (Mfamiliar =

DISCUSSION AND CONCLUSIONS

First, our research adds to existing literature that

Third, we offer important insights into the price-related

Country-of-Origin Effects and Willingness to Pay 33

34 Journal of International Marketing