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This study investigates customers’ evaluation of the offered price suggestion for a consumer durable sold under Pay-What-You-Want pricing. The relative use of internal reference price (IRP) and external reference price (ERP) is examined in customers’ price evaluation process. This study is a quantitative study employing a scenario-based approach to obtain responses from the participants. 208 students participated in between-subject factorial experiment design. ANCOVA and simple effects analysis were used to assess customers’ responses to measures like price assessment and perceived price fairness. Results show that respondents exhibit the relatively greater influence of ERP than IRP in the price evaluation process. This varying effect was attributed to two key factors, accessibility of the information and diagnostic perceptions.

Purpose This paper aims to investigate the influence of advertised reference price (ARP) and sales price (SP) as anchor points on the latitude of expected price, and subsequently on purchase intention (PI). The research involves the theoretical lens of selective anchoring mechanism, which allows investigation of the influence of ARP and SP in a situation where price estimation task is a “non-thoughtful processes”. Design/methodology/approach On the basis of quasi-experimental design, the study involves intercept survey of 142 shoppers. Findings The study finds that due to anchoring effect, the highest and the lowest expected prices shift toward ARP and SP, respectively. Consequently, it influences the latitude of expected price, which in turn influences purchase intention. In addition, the study proposes and tests a method to forecast expansion and contraction of the latitude of expected price. Research limitations/implications It suggests a new mechanism to understand the simultaneous influence of ARP and SP, provides a mechanism to understand shifts in price latitude’s end-points and investigates a phenomenon with two externally provided anchors. Practical implications The study highlights the role of the latitude of expected price in understanding consumers’ response. Results suggest that a plausible ARP, when joined with an above-expectation SP, can fetch better consumer responses. Originality/value The study uniquely investigates a problem with two anchor points and two estimation targets, and proposes a construct of internal price uncertainty (IPU).

Purpose - The purpose of this article is to investigate whether involved consumers utilize the same set of reference prices to evaluate an offer as compared to those who are less involved. Additionally, this study aims to investigate whether the processes employed in the two groups are different.Design methodology approach - A total of 200 students were enrolled to participate in a realistic shopping experience over a two-week period. In the course of the study, subjects were asked to provide information on their reference prices. They were also asked to evaluate an advertised offer for a pair of jeans. The data were analyzed using a structural equations methodology.Findings - Under high involvement, consumers utilize perceived normal price, an external market-based reference price, to adjust their internal standards, which in turn is used to evaluate retail price. In contrast, low-involvement consumers do not use their internal standards. Rather, they evaluate retail prices directly against external market-based references.Originality value - Despite decades of research on the role of reference prices, the moderating role of involvement on reference price utilization has not been researched adequately. The findings reported here add to existing knowledge in the field and shed additional light on the process by which consumers evaluate posted prices. The findings also emphasize the need to segment the market on the basis of reference price utilization and to design appropriate communication strategies for each.

[Display omitted] ► Identifying boundary condition to the effectiveness of exaggerated ARP. ► Exaggerated ARPs are more effective in favorably influencing consumers’ perceptions of retail offers under time pressure. ► In the presence of time pressure, high promotion frequency does not weaken the effectiveness of exaggerated ARPs. ► Managerial and public policy implications are discussed. Despite the prevalence of exaggerated advertised reference prices (ARPs) in retail ads and the potential for consumer vulnerability to false reference prices, research identifying boundary conditions to the effectiveness of exaggerated ARPs is scarce. We demonstrate that exaggerated ARPs are much more effective in favorably influencing consumers’ perceptions of retail offers when they feel time pressure while evaluating such offers. Further, although past research indicates that high promotion frequency weakens the effectiveness of exaggerated ARPs, we show that this is not observed when time pressure is present. We discuss the implications of this research and provide directions for future research.

[Display omitted] ► Consumers are less loss averse in internal than external reference prices. ► Two empirical regularities cause that consumers face few external and many internal losses. ► The more often losses occur the less responsive consumers become to these losses. ► The two empirical regularities explain the loss aversion asymmetry. ► Loss aversion asymmetry makes price promotions more effective for expensive brands. The literature has produced mixed support for loss aversion in a reference price context and the outcome may depend on the type of reference price. One extant study has reported empirical evidence that consumers are less loss averse in internal than external reference prices, but without discussing causes or implications. In the current study, we reconcile relevant literature and propose this asymmetric loss aversion result as an empirical generalization. Next, we provide and test an explanation: two empirical regularities in pricing cause that consumers tend to observe few losses for external reference price and many losses for internal reference price, making them less sensitive to internal than external losses. We use two scanner panel data sets to show that the two empirical regularities contribute to asymmetric loss aversion, while accounting for alternative explanations. We explore the implications of loss aversion asymmetry for the effectiveness of price promotions by simulation.

In a sales context, a common promotional tactic is to supplement a required purchase (i.e., the focal product) by offering a free product (i.e., the supplementary product). We examined the underlying mechanism driving consumers' evaluation of the supplementary product after such a promotion, with 120 undergraduate student participants at a large public university in Taiwan. Results showed that consumers demonstrated higher (lower) willingness to pay for a supplementary product that had higher (lower) levels of attribute complementarity with the focal product. However, this effect occurred only when the price of the focal product was much higher than consumer's internal reference price for the supplementary product. Our findings contribute to the literature on bundled products, reference price theory, and consumers' postpromotion perception of supplementary products' price. Theoretical and managerial implications are discussed.

The pricing of products and services sold over the Internet channel is becoming more dynamic. In part this is due to the increasing use of auction models in business and consumer markets to sell commodities, excess inventories, used merchandise, rare items collectibles, and other items. Marketers are resorting to dynamic prices even for goods and services sold at posted prices, spurred partly by the lower menu cost of changing prices on the Internet and partly as a response to consumer use of price-comparison bots. This paper explains the relevance of dynamic pricing in the digital economy by comparing the physical value chain with the virtual-information-based value chain. It explores the implications of certain aspects of dynamic pricing in consumer markets (e.g., dynamic pricing of posted prices, reverse auction pricing of goods and services as used by Priceline) from the perspective of consumer price expectations, the role of information and consumer learning, and their impact on consumer responses to prices across different product categories. Several propositions are developed, and issues for research are identified.

Reference price models have a long tradition in marketing and consumer research. Pricing strategies can utilize consumer response to gains and losses relative to internal reference prices, which are price expectations developed from past-observed prices. Consequently, many previous studies have been devoted to analyzing differences in internal reference price response across product categories and consumer characteristics. However, knowledge about internal reference price response across different store formats is missing. Our study aims to fill this research gap. To do so, we estimate a reference price model for the same set of brands and the same sample of consumers across two store formats (discount chain vs. supermarket chain). The prices for the brands in our model are similar across store formats. Results from our proposed model show that the same consumers are loss-averse at the discount chain while gain-seeking at the supermarket chain. Predicted by previous literature, we attribute the difference in internal reference price response to the different price image of the store formats. Overall, our research contributes to the reference price literature and provides important implications for pricing strategies at stores with different price image.

Prior studies examine whether or not using advertised reference price (ARP) increases consumers’ perceived gain from the purchase decision. However, few studies address whether or not the ARP should involve an online or offline source. Present study thus investigates the influence of the APR source on consumer perceived value. Empirical results indicate that consumers would perceive higher transaction value when an online seller adopts another online retailer’s sale price as ARP than when the online seller uses an offline competitor’s sale price as the ARP.

In the context of price discounts, a special type of price promotion, in which savings depend on the outcome of a gamble and are thus uncertain, has recently achieved some popularity. The question arises as to whether such gambled price discounts (GPDs) incur the negative reference price effect—that is, a downward shift in customers' internal reference price (IRP)—which is often associated with regular price discounts (RPDs). From several studies, including two longitudinal field experiments, the authors find that GPDs indeed alleviate the negative reference price effect: IRPs and actual repurchasing tend to be lower for RPDs than for GPDs and a no-discount control condition. Moreover, the authors explore the psychological underpinnings of these effects and show that the different consequences of GPDs versus RPDs on IRPs are more pronounced if information regarding product quality is limited. The authors demonstrate that findings are robust to variations of GPD discount levels and the probability of winning.