CAUSES AND CONSEQUENCES OF PRICE PREMIUMS

Existing literature that argues for the prevalence of price premiums i s examined. An evaluation of an extant model identifies several possib le boundary conditions that limit the applicability of the model. A se t of propositions is developed based on these boundary conditions, lin king buyer, seller, and market factors to the magnitude of price premi ums that should be available. Alternative means for empirical testing of the propositions are offered, and some implications and application s of this line of thinking for pricing and brand management are descri bed.