Track 10: Judgment & Decision Making II
Ryan Hamilton (Emory University)

10D. Price & Numerical Cognition

Saturday, March 5
3:45pm – 5:15pm EST
Discussant: Ryan Hamilton (Emory University)
MC: Franklin Shaddy (UCLA)
Calendar Invite: Add to calendar
Student Coordinator: Donald Gaffney (Vanderbilt University) (donald.r.gaffney@Vanderbilt.Edu)

Competitive Papers

The Differential Impact of Low Prices from Online Versus Brick and Mortar Retailers
Authors: Helen Colby (Kelley School of Business, Indiana University), Meng Li (University of Colorado, Denver)
Presenting Author: Helen Colby (Kelley School of Business, Indiana University)
Across three studies we demonstrate that consumers integrate low-price information into their reference price less when the low price is found at an online versus a brick-and-mortar retailer, and that the mechanism underlying this effect is differential trust of the retailer. Study 1 found this effect in the context of a single retailer-type product search. Study 2 demonstrates the effect is not simply an artifact of consumers expecting lower prices in brick-and-mortar settings, showing the effect when the online retailer with a very-low-price was encountered in the midst of an otherwise all brick-and-mortar retailer product search. Study 3 demonstrated that consumers have significantly less trust for online retailers with very-low-prices compared to brick-and-mortar retailers with similarly low prices, and this relative lack of trust underlies the lack of integration of the very-low-prices into price expectations.
When willingness-to-pay seems irrational: The role of perceived market price
Authors: Minah Jung (New York University), Ioannis Evangelidis (ESADE Business School,), Alice Moon (University of Pennsylvania)
Presenting Author: Minah Jung (New York University)
Five studies (N=3,526) reveal that willingness-to-pay (WTP) reflects perceived market price rather than personal valuation. Moreover, people tend to indicate WTP for the goods as if they were in the market for those goods, even when those goods are personally irrelevant (e.g., steak for vegetarians). We demonstrate that these market-related characteristics of WTP explain some of the well-documented anomalies such as preference reversals. Furthermore, merely highlighting that a WTP of $0 indicates not wanting to buy attenuates these anomalies. This research offers a novel interpretation for research using WTP and a simple intervention that shifts WTP closer to personal valuation.
The Numerical Processing Likelihood Model
Authors: Daniel Villanova (University of arkansas), Mario Pandelaere (Virginia Tech)
Presenting Author: Daniel Villanova (University of arkansas)
Research on the unit effect suggests consumers perceive differences expressed on an expanded scale as larger than those expressed on a contracted scale and hypothesizes that more numerate consumers should be less susceptible to this bias, but empirical results are mixed. In three experiments, the authors reconcile these conflicting findings by proposing the numerical processing likelihood model. More numerate individuals emphasize the relative representation when the task calls for it, but they also emphasize the absolute representation to a greater degree on other tasks. This leads to the more numerate exhibiting predictably less or more bias.
Don’t Show the Price Too Early: How (And When) Uncertainty Improves Perceived Price Fairness
Authors: Amin Shiri (Texas A&M University), Xiang Wang (University of Florida), Minzhe Xu (University of Florida), Chris Janiszewski (University of Florida)
Presenting Author: Amin Shiri (Texas A&M University)
Across three studies, we found that consumers perceive a price to be fairer if the price is first hidden and then revealed (vs. shown directly). We show that the experience of price uncertainty raises consumers’ expected price of the product, and therefore increases perceived fairness of the price and willingness to accept the offer. However, the effect on perceived fairness may reverse in contexts where consumers tend to perceive the price as favorable (e.g., price promotions). 

Flash Talks

Subscription Trials Offered at a Small Price Are More Attractive Than Free Trials
Authors: Randy Gao (New York University), Joshua Lewis (New York University), Minah Jung (New York University)
Presenting Author: Randy Gao (New York University)
Subscription services often offer free trials to encourage adoption from nonusers. Are free trials always the best policy? In two preregistered studies, we find that subscription trials offered at a small price ($0.99) elicit stronger subscription likelihood than similar trials offered for free. This is because consumers perceive the trial offered at a small price as a better deal in comparison to the subscription’s regular, undiscounted price. Additional results rule out an alternative explanation based on price-quality inference.
The Asymmetric Effect of Price Recommendation in Consumer Sequential Search
Authors: Lin Fei (University of Chicago), Dan Bartels (The University of Chicago Booth School of Business)
Presenting Author: Lin Fei (University of Chicago)
When people shop online, they often encounter recommendations on whether they should purchase now or keep searching for a better price. Our research examines how this price recommendation changes consumers’ searching behaviors using a sequential search task with a theoretical optimal stopping point. We found when consumers undersearch relative to the optimal, price recommendations increase the number of searches. However, when consumers oversearch, recommendations do not decrease the number of searches. Further, since more consumers oversearch when they have limited information about the price distribution, they are no more likely to comply to the recommendation than those with information.

Posters

Watch Out! How Strikethrough Price Crosses Out Purchase Intention
Authors: Jintao Zhang (Drexel University), Yuna Choe (University of North Texas)
Presenting Author: Jintao Zhang (Drexel University)
In this research, we examine a novel factor of discount price presentation format, strikethrough, on consumers’ deal evaluation. We find that, counterintuitively, a strikethrough on the original price decreases consumers’ purchase intention toward the discounted products due to increased perceived difficulty of calculating discounts. Moreover, we show that when consumers are cognitively busy, the effect of strikethrough pricing is diminished or even overturned as consumers have limited ability to process the price discount information and may rely on heuristic processing, and consequently, consumers would have a higher purchase intention toward discounted products with strikethrough pricing format.
Tiered Discounts as Multiple Numeric Anchors
Authors: Andong Cheng (University of Delaware), Gretchen Ross (Texas Christian University)
Presenting Author: Gretchen Ross (Texas Christian University)
Tiered discounts introduce multiple threshold levels whereby the discount amount increases as spending increases (e.g., spend $100 or more and receive 10% off, spend $200 or more and receive 20% off). We predict that consumers anchor on these arbitrary thresholds firms set. However, because every tiered discount involves multiple thresholds, it is unclear which threshold becomes the most salient anchor. This research investigates how anchoring and adjustment interact with tiered discounts and seeks to determine how retailers can design tiers to increase spending. We find the middle tier feels most salient and small tier increments lead to higher spending.
8 in 10 vs. 80 in 100: Numerical Framing Effects on Consumer Inferences and Behavior
Authors: Kun Wang (Rutgers University), Gabriela Tonietto (Rutgers University)
Presenting Author: Kun Wang (Rutgers University)
Numerical information is often presented in terms of small-denominator fractions (4 out of 5 dentists) or percentages (80% of dentists). The present research demonstrates that although statistically equivalent, consumers infer that numerical claims with larger denominators were derived from larger samples. The results of two studies show that percentages and fractions with a denominator of 100 are perceived equivalently and lead to higher inferred sample sizes than fractions with smaller denominators (e.g.,10) but lower inferred sample sizes than fractions with larger denominators (e.g., 1000). The results also provide preliminary evidence that norm nudges are more successful when utilizing larger denominators.
A Material-Experiential Asymmetry in the Scale Unit Effect
Authors: Lina Xu (New Mexico State University), Mihai Niculescu (New Mexico State University)
Presenting Author: Mihai Niculescu (New Mexico State University)
Past research on scale unit effect suggests that consumers tend to perceive the same quality difference as larger on scales that have many units than scales with fewer units. However, its exact application in online ratings has not been discussed before. Across two studies, this research posits and demonstrates that when evaluating material purchases in rating scales with a higher number of units, consumers are willing to pay more for above-average options; however, this effect disappears when evaluating experiential purchases. Therefore, purchase type moderates the scale unit effect on product evaluations in the context of average ratings.
Thanks, it was on Sale: On the Desire to Justify Prices Paid Others
Authors: Justin Pomerance (University of New Hampshire), Sharaya Jones (George Mason University)
Presenting Author: Justin Pomerance (University of New Hampshire)
Despite having ample experience judging others’ purchases, consumers have a poor intuitive sense of how others judge their purchases. In this research, we demonstrate that people overestimate how much others judge their purchases. Specifically, we show that people feel an outsized need to justify the prices they have paid for their purchases to others. We demonstrate that this need to justify the prices of one’s purchases boosts behavioral intentions for word of mouth, as people needlessly seek to bolster others’ opinions of them.
Spillover Effects of Price Unfairness
Authors: Yue Zhang (Peking University HSBC Business School), Jooyoung Park (Peking University HSBC Business School)
Presenting Author: Yue Zhang (Peking University HSBC Business School)
This research examines the spillover effect of price unfairness in a restaurant setting. Two studies show that when an exceedingly high price is set for a standardized product, the perception of price unfairness can transfer to the judgment of other products. More importantly, the perceived price unfairness decreases consumers’ intention to purchase other non-standardized products, indicating the spillover effect of price unfairness. However, adding a secondary attribute to standardized products can offset the negative impact. Study 2 shows that adding a trivial secondary attribute to the expensive standardized product can offset the negative impact of price unfairness.
Cashbacks: Buying More or Less?
Authors: Shweta Jha (Indian Institute of Management, Indore), Sanjeev Tripathi (Indian Institute of Management, Indore)
Presenting Author: Shweta Jha (Indian Institute of Management, Indore)
Offering cashbacks has emerged as a new tool for marketers to make new customers and engage the existing ones. While prior research on cashbacks highlighted its benefits, this study investigates the cost of offering cashbacks. Studying the different cashback conditions, we found that cashbacks can negatively affect retailers in certain conditions, leading consumers to reduce the ticket size of their transactions. The findings of this study have substantial implications for marketers, pricing managers, and third-party cashback organizations.
Arousal Reduces the Availability of Internal Reference Prices in Fairness Judgments
Authors: Alexander DePaoli (Northeastern University)
Presenting Author: Alexander DePaoli (Northeastern University)
The current research explores the impact of affective and physiological arousal on consumers’ price fairness judgments. Participants experiencing high arousal were found to be more likely to evaluate prices based on external references, and were thus more likely to judge high stimulus prices as fair. This was not found to be due to any increase in the availability or diagnosticity of external reference prices, but rather it was driven by high arousal leading to reduced availability of participants’ internal reference prices. Four studies support the findings.
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