Consumers may use price as an indicator of quality when products are newly introduced; or if little is known about them; or if they are primarily artistic rather than functional. A high price may be reassuring, while a low price may lead the consumer to fear that the item is of poor quality or taste. If so, the demand curve could be upward sloping. More than a few new businesses have probably failed because they priced too low, rather than too high.

For items that are primarily functional in nature, this effect usually disappears over time as consumers become more informed about the product's characteristics and quality; however, the effect may persist for primarily artistic items.

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