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 brand’s COO
affects a consumer’s willingness to pay and (2) the extent to which the consumer’s 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 reviews of COO research, see Jaffe and Nebenzahl

O international marketing is whether the origin of a

product makes it more or less preferable to con-
sumers. Country of origin (COO) serves as an extrinsic
2006; Pharr 2005; Phau and Chao 2008; Wilcox 2005).

Various articles in the business press also underscore the

informational cue for consumers’ perceptions and
evaluations of a product (Verlegh and Steenkamp 1999),
and research on COO effects—that is, the impact that
cognitive, affective, and normative associations with a
particular country have on consumer attitudes—shows
that a product’s 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 Old-
enkotte is a postdoctoral researcher (e-mail: katharinaoldenkotte@
gmx.de), GfK-Chair of Marketing Intelligence, University of
Erlangen–Nuremberg. Adamantios Diamantopoulos is Professor of
International Marketing, Chair of International Marketing, Univer-
sity of Vienna (e-mail: adamantios.diamantopoulos@univie.ac.at). The
authors thank the Dr. Theo and Friedl Schöller Research Center for
Business and Society and the Hans Frisch-Foundation for supporting
this research study. They also thank the four anonymous JIM review-
ers for useful comments over several review rounds.
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 sen-
sitive 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 neg-
lected, such that “very little is known regarding the influ-
ence 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 meta-
analyses 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. 19–41
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 pur-
chase 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 unac-
ceptable. Thus, product evaluations and purchase inten-
tions are “softer” outcome variables than price and there-
fore 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 evi-
dent 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 “mone-
tize” the COO effect is of great significance because
price is one of the most powerful marketing-mix ele-
ments 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 vol-
ume 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 con-
text, 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 Wang’s (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 (Völckner 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 deci-
sions (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 con-
sumers 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 familiarity—“the extent
of a consumer’s direct and indirect experience with a
brand” (Campbell and Keller 2003, p. 293)—as a poten-
tial moderator of the COO–WTP relationship. We
hypothesize that the strength of the COO effect may
depend on the consumer’s familiarity with the brand
involved (Josiassen, Lukas, and Whitwell 2008) and
examine this relationship in both a low- and high-
involvement setting. In the former setting, we employ
Becker, DeGroot, and Marschak’s (1964) procedure
(hereinafter, BDM) to measure consumers’ WTP. The
BDM procedure is a highly accurate approach for reveal-
ing respondents’ “true” WTP because of its incentive-
compatible character and realistic point-of-purchase set-
ting (Wertenbroch and Skiera 2002).
Our study’s contribution is threefold. First, on the theo-
retical front, we apply equity theory as a theoretical
framework to the relationship between COO percep-
tions and consumers’ WTP and provide empirical evi-
dence 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 knowl-
edge, our study is the first to analyze in a comparatively
realistic point-of-purchase setting the extent to which a
branded product’s 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
product—it 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” (Car-
rington, 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, depend-
ing on the COO of the product. These insights are of
substantial value to international marketing managers
designing a pricing strategy, particularly when the con-
sumer is confronted with product offerings from multi-
ple COOs differing in their image. Thus, our study’s
findings provide managerial support for decisions
related to customer value-oriented pricing, price differ-
entiation, 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, Todiño, and Lecraw 1996). Price toler-
ance 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 (Simon-
son and Drolet 2004), and direct comparison of the
Country-of-Origin Effects and Willingness to Pay 21
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 prod-
uct 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 inter-
national trading context.
Our study is similar to Hu and Wang’s (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 partici-
pants have the opportunity to adjust their offer (WTP)
and thus react to steps undertaken by the other partici-
pants of the auction. In contrast, with the BDM proce-
dure, 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 Wang’s investigation,
the origin of the retailer, and not that of the product, was
the focus of analysis. The image that respondents associ-
ate with a retailer of a certain country is not necessarily
the same as the one they associate with a product of a cer-
tain 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 (particu-
larly 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 corre-
lated, 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 necessarily—consumer 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 no—COO, for example,
has been found to explain, on average, approximately
30% in product evaluations but less than 20% in pur-
chase 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 indicat-
ing their preferences.
Third, while the use of intentions data to predict behav-
ior is widespread among academics and practitioners
alike, it is not without problems. Specifically, “inten-
tions 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 pro-
vides 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
22 Journal of International Marketing
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 Wal-
ster 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” rela-
tive 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, con-
sumers 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 pro-
vide a relatively higher input (in terms of money and/or
effort), whereas a relatively lower benefit from the prod-
uct prompts a relatively lower input. If the outcome-to-
input ratio represents, from the consumers’ point of
view, an equitable deal, they consider the exchange rela-
tionship 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 associ-
ated 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 evalua-
tions of products originating from the various COOs
also differ (Pappu, Quester, and Cooksey 2007). Bearing
in mind that country image refers to “the overall percep-
tion consumers form of products from a particular
country, based on their prior perception of the country’s
production and marketing strengths and weaknesses”
(Roth and Romeo 1992, p. 480), from a consumer’s per-
spective, a product from a COO with a favorable coun-
try image is likely to be associated with a higher benefit
than a product from a COO with a less favorable coun-
try 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 product’s quality (Olson 1972).
Extrinsic cues constitute attributes that are product-
related but external to the physical product, such as the
COO, the brand name, or the price. In contrast, intrinsic
cues refer to the product’s 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
Country-of-Origin Effects and Willingness to Pay 23
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 product’s 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 situa-
tion 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 famili-
arity does not substantially influence the effect
of COO on consumers’ WTP.
In a high-involvement setting, both extrinsic and intrin-
sic cues should become important in product evaluation.
Consumers’ use of cues as indicators to assess a product’s
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 high-
involvement 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 stud-
ies, 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 congruency—that is, when
the COO coincides with the home country of the
brand (Häubl 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 relation-
ships in an incongruent condition—that is, when the
COO and home country of the brand (i.e., the brand
origin) are different. Such incongruence is common in
today’s marketplace because the globalization of mar-
kets drives numerous companies to consider produc-
tion 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 brand’s 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 lim-
its on the generalizability of the observed effects, the
use of student samples is justified because our focus is
on testing theoretical hypotheses rather than generat-
ing 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 inter-
subject 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).
24 Journal of International Marketing
EXPERIMENT 1
Experimental Design and Stimuli
Experiment 1 uses a 2 (COO: favorable vs. unfavora-
ble) ¥ 2 (brand familiarity: high vs. low) between-
subjects factorial design. The participants, postgradu-
ate business and social sciences students from a well-
known German university, were randomly assigned to
the four experimental groups and received an opportu-
nity to actually buy the branded products in the study.
They also received extra course credit for their partici-
pation. 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
study’s external validity (Lynch 1982). Second, the study
participants might be obliged to actually buy the
branded product with their own money (see our descrip-
tion of the BDM procedure), and mineral water is suit-
able 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 Romeo’s
(1992) well-established scale to measure country image
(see the Appendix), a pretest (n = 30) confirmed that
France’s image (MFrance = 5.13) is significantly more
favorable than Austria’s (MAustria = 4.43; t(58) = 2.46,
p < .05).
For brand familiarity, we manipulated the experimental
conditions by choosing mineral water brands that actu-
ally 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 Aus-
tria, we chose Römerquelle (high familiarity) and Vös-
lauer (low familiarity). Pretest results also revealed signifi-
cant 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 deter-
mined 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; how-
ever, 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 under-
stood that they could not influence the distribution of
prices in the urn. Finally, we asked them for the maxi-
mum amount of money they would be willing to pay for
the product. If a participant’s stated WTP was higher
Country-of-Origin Effects and Willingness to Pay 25
than or equal to (lower than) the selling price drawn
from the urn, he or she had to (could not) buy the prod-
uct 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 condi-
tions 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 covari-
ates 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 ques-
tions about the realism of the experimental treatments.
Their answers revealed no threats to the study’s internal
validity. We provide a description of all the variables
and associated psychometric information based on con-
firmatory factor analysis (CFA) in the Appendix.
Results
Manipulation Checks. To investigate the validity of the
COO manipulation, we conducted an analysis of vari-
ance (ANOVA) with the manipulated COO (France vs.
Austria) as the independent variable and the measured
country image (Roth and Romeo 1992) as the depend-
ent variable. The COO manipulation check showed that
the country image of France is significantly more favor-
able 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 Römerquelle; Mfamiliar =
2.88) is much more familiar to consumers than the com-
bination of lesser-known brands (French brand Thonon,
Austrian brand Vöslauer; Munfamiliar = 1.22; F(1, 125) =
59.70, p < .001). Thus, the manipulation of both inde-
pendent 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 covari-
ate 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 famili-
arity 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 consumer’s WTP,
regardless of familiarity with the brand in a low-
involvement setting. Finally, the covariate brand com-
mitment revealed a marginally positive impact on WTP.4
Figure 1. Experiment 1: Means of WTP by Experimental Condition
1.15
1.10 1.09 (.09)
1.05
WTP (in Euros)
1.00
.95 .95 (.09)
.90
.85
.80
.75
.70
Favorable Country Image Less Favorable Country
(France)
COO
Notes: Standard deviations are in parentheses.
26 Journal of International Marketing
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
Experimental Design and Stimuli
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 con-
text, a situation of incongruity exists when the company
decides to use sources (i.e., water springs) and bottling
plants in another country than the brand’s home country.
To manipulate the COO and brand familiarity, we
retained France as the COO with a more favorable coun-
try 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 rep-
resents the incongruent setting because the COO is not
the same as the home country of the focal brands.
High brand
familiarity
Low brand
.80 (.09) familiarity
.73 (.09)
Image (Austria)
Figure 2. Experiment 1: Price Response Functions per Experimental Treatment
A: COO

100%
90%
Relative Number of Consumers

80%
70%
(Cumulative)

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
Austria

B: Brand Familiarity

100%
90%
Relative Number of Consumers

80%
70%
(Cumulative)

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
Low brand familiarity

A pretest (n = 30) using Roth and Romeo’s (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 signifi-
cantly 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 ran-
domly 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

Country-of-Origin Effects and Willingness to Pay 27

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 France’s
country image much more favorably (MFrance = 4.70)
than Turkey’s (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 famili-
arity as factors, and brand commitment as a covariate.
We found a significant main effect of COO on WTP
Figure 3. Experiment 2: Means of WTP by Experimental Condition
1.15
1.10
1.05 1.02 (.07)
WTP (in Euros)
1.00
.97 (.07)
.95
.90
.85
.80
.75
.70
Favorable Country Image Less Favorable Country
(France)
COO
Notes: Standard deviations are in parentheses.
28 Journal of International Marketing
(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 moderat-
ing role of brand familiarity in a low-involvement set-
ting. 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 sig-
nificant effect of COO on the outcome variable might be
explained by the differences in country image and/or the
differences in congruity (Häubl 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.
High brand
familiarity
Low brand
familiarity
.79 (.07)
.74 (.07)
Image (T
(Turkey)
Turkey)
urkey)
Figure 4. Experiment 2: Price Response Functions per Experimental Treatment

A: COO

100%
Relative Number of Consumers

90%
80%
70%
(Cumulative)

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

B: Brand Familiarity

100%
Relative Number of Consumers

90%
80%
70%
(Cumulative)

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 Low brand familiarity

In a second step, we extracted the (unstandardized) regres- EXPERIMENT 3

sion residuals and used them in a t-test analysis of the con-
gruent and incongruent conditions. Because the t-test
revealed no significant difference between the congruent
COO–country-of-brand condition (France) and the incon-
gruent COO–country-of-brand condition (Turkey) (t(127)
= .78, p = .44), no incongruity effect can be identified.
Thus, the observed COO effect on WTP is solely attribut-
able to the difference in country images, whereas con-
gruity does not seem to play a role.
Experimental Design and Stimuli
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 par-
ticularly relevant in the case of high-involvement prod-
ucts, we conduct Experiment 3 under conditions of incon-
gruity between the COO and the brand’s home country.

Country-of-Origin Effects and Willingness to Pay 29

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 product’s value should be in line with most
people’s 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 Zaichkowsky’s (1994) scale, we measured prod-
uct involvement with four items that refer to the per-
ceived importance, relevance, and valuation of the
product. A pretest subsequently revealed that partici-
pants 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: favor-
able 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 d’Astous 2008). For the manipu-
lation 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 headquar-
ters location and therefore represents the congruent con-
dition; 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 treat-
ment 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-
30 Journal of International Marketing
ning to buy new sports shoes. The shoes were presented
in a picture, and the brand and COO were included in
the product’s 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 contin-
gent 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 com-
pleted 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 dif-
ferences 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 meas-
ured 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 con-
tingent valuation is afflicted by overestimations in
response behavior (Neill et al. 1994; Völckner 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 (Völckner 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 explana-
tion because respondents might overstate (or under-
state) their true WTP when they believe that their
response has an influence on the actual product offering
(or on the product’s price) (Wang, Venkatesh, and Chat-
terjee 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 (Völckner 2006). Never-
theless, 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 Experi-
ment 3, we are aware of the overestimation in WTP that
is likely to occur. To take this critical point into consid-
eration, we treated the reported WTP estimates as hav-
ing only rank (ordinal) data quality and used a nonpara-
metric 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 Kruskal-
Wallis test results revealed that consumers’ WTP is signifi-
cantly affected by the COO (H(1) = 4.03, p < .05). This
supports H1. Furthermore, Jonckheere’s test shows a sig-
nificant 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 simultane-
ously compared all four experimental conditions; the
corresponding Kruskal-Wallis test revealed a significant
Country-of-Origin Effects and Willingness to Pay 31
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, result-
ing in a significance level of .008. The results show that
only one group (less favorable COO/low brand famili-
arity) 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 famili-
arity) 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 respon-
dents’ WTP.
Following the same procedure as in Experiment 2 to
identify a potential congruity effect, we found no differ-
ence between the congruent COO–country-of-brand
condition (United States) and the incongruent
COO–country-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 con-
gruity 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
Figure 5. Experiment 3: Means of WTP by Experimental Condition
85
83 81.51 (4.04)
81
79
78.21 (4.05)
WTP (in Euros)
77
75
73
71
69
67
65
Favorable Country Image Less Favorable Country
(United States)
COO
Notes: Standard deviations are in parentheses.
dependent variable. In addition, we used different meas-
urement formats for our variables (Podsakoff et al.
2003). Finally, we employed Lindell and Whitney’s
(2001) approach using “the smallest observed correla-
tion among the manifest variables as a proxy for com-
mon method variance” (Podsakoff et al. 2003, p. 893).
All significant correlations between the covariates and
WTP remained significant after this adjustment, provid-
ing 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 fol-
low-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
32 Journal of International Marketing
81.02 (4.04)
4.04)
High brand
familiarity
Low brand
familiarity
66.59 (4.17)
4.17)
Image (South Korea)
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 exper-
imental treatment groups differed significantly from
each other (H(3) = 12.49, p < .01). Subsequently, Mann-
Whitney 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 brand’s home
country. These findings extend the field’s 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 theo-
retical 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 theoreti-
cal understanding of COO effects by explicitly consider-
ing 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 con-
tributions 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 evalua-
tion 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 lim-
itations of contingent valuation in the current study.
Country-of-Origin Effects and Willingness to Pay 33
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 con-
sumer’s familiarity with a brand dilutes the strength of
the COO’s 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 influ-
ence on consumers’ WTP determination in all three
experiments. This finding supports previous research sug-
gesting that consumers with a strong and favorable brand
attitude are willing to pay a price premium (Chaudhuri
and Holbrook 2001). From a company’s perspective, it is
therefore worthwhile to take the extent of a consumer’s
brand commitment into account and improve it, because
consumers reveal higher WTP as their attachment to the
brand increases. Regarding consumer price conscious-
ness, 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 accepta-
bility 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 prod-
uct from a COO with a more favorable country image.
In two of our studies, this result emerges from a rela-
tively 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 exam-
ple, 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 per-
ceived 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 generaliz-
ability of our findings. Although Experiments 1 and 2
have been conducted under relatively realistic conditions
in which respondents actually had to pay for the prod-
uct, 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 worth-
while 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 natu-
ral 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, atten-
tion 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
34 Journal of International Marketing
account when they make a decision about the maxi-
mum 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 benefit-
ing from a favorable COO image, it should emphasize
the notion of COO in its communication strategy—for
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 inter-
view with the Financial Times, the chief executive offi-
cer of the luxury group Tod’s stated the following
when being asked whether the “Made in Italy” label
will retain its luster: “Yes, because it is still the maxi-
mum 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. That’s not easy to copy” (Asp-
den 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, indi-
cates the need for caution in decisions about a change in
COO. In this context, the inability to identify an incon-
gruity 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 coun-
try 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 exam-
ple, 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 part-
nership, it should explicitly consider the extent to which
this cooperation may have repercussions (positive or nega-
tive) on its customers’ WTP. This issue is particularly
important for low-involvement products and for high-
involvement products that do not enjoy high familiarity
among customers.
Finally, consumers increasingly demand and are more
aware of sustainable production, which includes envi-
ronmental 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 out-
lay, conditions of employment or eco-friendly produc-
tion. In Germany, for example, consumers increasingly
tend to buy local and regional products (positive image
of local/regional area that consumers can trust, avoid-
ance of long-distance shipments, and so on play a role
in this regard). Similarly, with respect to ethical and eco-
friendly 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 repeat-
edly 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.
Country-of-Origin Effects and Willingness to Pay 35
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 inde-
pendent 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 famili-
arity) 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).
 Appendix. Constructs and Items
Variable
(Assumed
Influence on
WTP) Conceptualization
Country “Country image is the overall
image (+) perception consumers form of
products from a particular
country, based on their prior
perception of the country’s
production and marketing
strengths and weaknesses.”
36 Journal of International Marketing
(Roth and Romeo 1992,
p. 480)
Brand “Brand familiarity reflects the
familiarity (+) extent of a consumer’s direct
and indirect experience with a
brand.” (Campbell and Keller
2003, p. 293)
Average
Construct Variance
Measurement Cronbach’s a Reliability Extracted
Four items on a seven-point bipolar semantic differential .81/.86/.86 .81/.87/.86 .52/.63/.61
scale:
1. How would you rate innovativeness of products from
[COO]? Innovativeness designates the use of new tech-
nology 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 = “attrac-
tive design”)
3. How would you rate the prestige of products from [COO],
including their exclusivity, status, and brand name reputa-
tion? (1 = “low prestige,” and 7 = “high prestige”)
4. How would you rate the workmanship of products
from [COO], which comprises reliability, durability, crafts-
manship, and manufacturing quality? (1 = “bad workman-
ship,” and 7= “good workmanship”)
Source: Roth and Romeo (1992)
Five items on a seven-point semantic differential scale: .92/.94/.97 .95/.96/.97 .80/.84/.87
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)
 Appendix. Continued
Variable
(Assumed
Influence on
WTP) Conceptualization
Covariates
Price Price consciousness refers to
consciousness “the degree to which the con-
sumer focuses exclusively on
paying a low price.” (Lichten-
stein, Ridgway, and Nete-
meyer 1993, p. 235)
Purchase The level of perceived per-
involvement sonal relevance or importance
a consumer attaches to a
product or brand during
choice processes. (Mittal and
Lee 1988)
Brand The construct refers to the
commitment pledging and binding of a
consumer to a brand choice
within a product class; thus, it
describes an emotional or psy-
chological attachment to a
brand. (Ahluwalia, Unnava,
and Burnkrant 2001)
Country-of-Origin Effects and Willingness to Pay 37
Average
Construct Variance
Measurement Cronbach’s a Reliability Extracted
Four items on a seven-point Likert-type scale (1 = “strongly .85/.87/.77 .87/.88/.79 .64/.65/.50
disagree,” and 7 = “strongly agree”)
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)
Three items on a seven-point Likert-type scale (1 = “strongly .90/.91/.89 .91/.91/.89 .76/.78/.73
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 .79/.80/.78 .80/.81/.79 .57/.59/.56
disagree,” and 7 = strongly agree”)
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)
 Appendix. Continued

Variable
(Assumed Average
Influence on Construct Variance
WTP) Conceptualization Measurement Cronbach’s a Reliability Extracted

Product design The visual product esthetics
that create a product’s appear-
ance in terms of color, size,
shape, proportion, pattern,
and so forth. (Bloch, Brunel,
and Arnold 2003)
Product The construct refers to the
Four items on a seven-point semantic differential scale .89/.89/.89 .90/.88/.87 .70/.65/.65
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)
Five items on a seven-point semantic differential scale N.A./N.A./.94 N.A./N.A./.94 N.A./N.A./75

38 Journal of International Marketing

experience knowledge, experience and 1. How often do you use [product]? (1 = “never,” and 7 =
expertise a consumer disposes “permanently”)
with respect to a particular 2. How familiar are you with [product]? (1 = “unfamiliar,”
product. (Alba and Hutchin- and 7 = “familiar”)
son 1987) 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)
Experience Visit to the country Have you ever been to [COO]? (yes/no)
with COO

Notes: Cronbach’s 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.
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