26(34)
Price versus Quality
More or less as a bonus, some results on the relationship between price
and quality are next shown. They came out as a by-product from the
computation of the price per quality unit used as the independent variable
of the distribution function.
The somewhat surprising result is that among the 80-plus procurement
operations where at least one quality component was used, only 20-plus
exhibited a clearly positive correlation between price and quality, 20-plus a
clearly negative correlation, whereas no significant correlation was found in
the remaining 40 cases. Three illustrative examples are shown in Figure 3.
The general conclusion is that no positive correlation between price and
quality can be expected. Price cannot be used as a quality indicator. This is
important information to procuring entities, given that large and well-
established suppliers often try to use their brands as a signal of quality in
order to be able to charge a higher price.
