Is the price right? Understanding contingent processing in reference price formation Academic Article uri icon

abstract

  • Although interest in buyers' reference prices continues to grow, relatively little is known about how they are formed and the factors that shape the formation of such price standards. This paper explores the contingencies triggered in buyers' reference price formation by (a) the discrepancy of price claims encountered in the marketplace relative to prior price beliefs, and (b) shopping experience. In a normal price estimation task, both experienced and inexperienced shoppers displayed a tendency to rely more on the price claims presented in the task than on prior price beliefs. This tendency increased when the claims were below price expectations and diminished when the claims were above expectations. Interestingly, experienced and inexperienced shoppers showed almost an identical approach to normal price estimation when the claims either matched or were below expectations. However, significant differences emerged when the claims were above expectations. Whereas experienced shoppers reduced their reliance on such discrepant claims, inexperienced shoppers did not. The results of this investigation underscore the usefulness of a contingency approach for guiding future research efforts directed at understanding buyers' reference price formation.

author list (cited authors)

  • Yadav, M. S., & Seiders, K.

citation count

  • 49

publication date

  • September 1998