Anchoring in Payment: Evaluating a Judgmental Heuristic in Field Experimental Settings (original) (raw)
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Journal of Marketing Research, 2011
Exposing consumers to extreme prices can influence the price they are willing to pay for both related and unrelated products. Drawing on previous theories of anchoring and adjustment and selective accessibility of judgment-relevant knowledge, the authors provide an account of both asymmetries in the impact of price anchors across product categories and contingencies in the occurrence of these asymmetries. Four studies show the deliberate consideration of price anchors that can play a key role in whether the effect of the anchors will generalize across product categories. Specifically, an explicit comparison of a product to a price anchor increases the accessibility of features that represent a product available at this price. In turn, these thoughts influence the price that consumers are willing to pay for these products. In the absence of this deliberation, however, anchors influence both related and unrelated products, provided no other cognitive activity occurs in the interim.
Psychology & Marketing, 2021
This paper investigates social influences on Pay-What-You-Want (PWYW) pricing decisions by combining a socio-psychological phenomenon, called 'spotlight effect' (defined as an egocentric bias while estimating the salience of one's own behavior and external appearance), with the wellestablished 'anchoring and adjustment' perspective. We test our hypotheses with one field study and two lab experiments. Findings show that when making a payment in PWYW setting, customers perceive greater attention on self (vs. others) and in the presence of distant (vs. close) others, which makes them initially anchor the price they are willing to pay on their internal reference price. However, this anchoring effect is adjusted downwards (i.e., reduced) in the presence of external reference prices. Our findings would help managers understand the factors influencing customers' PWYW pricing decisions, based on their internal and external reference prices. Managers can further use this knowledge to develop more effective strategies to drive higher PWYW prices.
2018
Prior research on anchoring indicates that arbitrary values can influence human judgment and decision-making. However, the findings differ regarding the magnitude of this effect, implying that in some circumstances the anchoring phenomena may not occur at all. The present research suggests that this behavior is not universal and attempts to identify how consumer self-confidence (CSC), a personal trait, and product category (hedonic vs. utilitarian) may affect consumers? susceptibility to anchoring effect on participants? willingness to pay. Although the moderation relationship could not be proved, it was statistically demonstrated that the kind of consumption (utilitarian/hedonic) accounts for 25% of the variability of consumer?s willingness-to-pay. Overall, this research contributes to the literature on Consumer Behavior, by shedding light on personal traits and product features that can shape anchoring response.
Field Experiments on Anchoring of Economic Valuations
SSRN Electronic Journal, 2000
A pillar of behavioral research is that preferences are constructed during the process of choice. A prominent finding is that uninformative numerical "anchors" influence judgment and valuation. It remains unclear whether such processes influence market equilibria. We conduct two experiments that extend the study of anchoring to field settings. The first experiment produces evidence that inexperienced consumers can be anchored in the value elicitation process, yet there is little evidence that experienced agents are influenced by anchors. The second experiment finds that anchors have only transient effects on market outcomes which converge to equilibrium predictions after a few market periods.
The Behavioral Perspective on Pay What You Want Pricing*
Journal of Business Anthropology
PWYW pricing has always been non-normative from an economic perspective. As explained by Egbert (2017), it runs counter to neoclassical economic assumptions that consumers should behave rationally in seeking to maximize their own utility. Thus, the majority of people should pay zero for any product sold in a PWYW context. In concurring with the author that reciprocity plays a factor in influencing profitability in some PWYW pricing contexts, the economics and marketing literatures can add additional empirical evidence. Drawing on literature that showed how perceptions of fairness and altruism increased payments under PWYW pricing (Kim, Natter, and Spann 2009), Jung et al. (2014) showed that Pay-It-Forward pricing, where each consumer pays what they want for the purchase of the following consumer can increase revenue generated. In one of their studies, turning a museum's admissions prices from a PWYW pricing scheme to a scheme where each person paid what they wanted for the entrance fee of the next person in line increased entrance revenues for the museum. Thus, just by converting a short one off interaction into an ongoing reciprocity based situation, companies can increase the amount paid for their products. In those cases, reciprocity is occurring between individual consumers rather * Comment on Egbert, Henrik, "Pay-What-You-Want Pricing," in this issue.
Starting point anchoring effects in choice experiments
2006
Dichotomous Choice Contingent Valuation studies. Recently, another stated preference method known as Choice Experiments has gained in popularity as well as the number of applied studies. However, as the elicitation of preferences in Choice Experiments resembles the Dichotomous Choice format, there is reason to suspect that Choice Experiments are equally vulnerable to anchoring bias. Employing different sets of price levels in a so-called Instruction Choice Set presented prior to the actual choice sets, the present study finds that preferences elicited by Choice Experiments can be subject to starting point anchoring bias. Different price levels provoked significantly different distributions of choice in two otherwise identical choice set designs. On a more specific level, the results indicate that the anchoring subjectivity in the present study is gender dependent, pointing towards, that female respondents are prone to be affected by the price levels employed. Male respondents, on the other hand, are not sensitive towards these prices levels. Overall, this implicates that female respondents, when employing a low-priced Instruction Choice Set, tend to express lower willingness-topay than when higher prices are employed.
Journal of Experimental Psychology: Applied, 2008
There are many contexts in which people make judgments about prior judgments. For example, Internet shopping bots (e.g., NexTag.com) allow consumers to search for products and, if the price is too high, list a price at which they would consider making the purchase (i.e., base judgment). If the price drops to this level, the vendor generates an e-mail inviting the consumer to execute the transaction at the reduced price (i.e., contingent judgment). The authors show that the consideration price depends on the content of retrieved information, whereas the willingness to execute the transaction at the consideration price depends on the ease-of-retrieving the information. The authors use different offer prices to encourage the consumer to retrieve information consistent with different product quality levels. The authors also select offer prices so that information retrieval is more difficult at moderate offer prices than at high or low offer prices. Accordingly, the authors show that the consideration price increases as the offer price increases, but the willingness to execute the transaction at the consideration price is greater when there are high and low, as opposed to moderate, offer prices.
Eliciting Willingness to Pay Without Bias: Evidence from a Field Experiment*
The Economic Journal, 2007
Concern exists that hypothetical willingness to pay questions overestimate real willingness to pay. In a field experiment, we compare two methods of removing hypothetical bias, a cheap talk approach and a certainty approach. Subjects, who are diabetes patients, receive a real or hypothetical offer to purchase a pharmacist-provided diabetes management program at several prices. Individuals are placed in three treatment groups: real, stated preference after cheap talk, and stated preference with certainty follow-up. We find evidence of hypothetical bias for unadulterated contingent valuation in that the mean hypothetical willingness to pay is about twice as high as the real willingness to pay ($42 versus 22).Contingentvaluationwithcertaintystatementsremovesthehypotheticalbias(meanof22). Contingent valuation with certainty statements removes the hypothetical bias (mean of 22).Contingentvaluationwithcertaintystatementsremovesthehypotheticalbias(meanof20), but the cheap talk approach has no significant impact (mean of $44). Our findings suggest that willingness to pay can be accurately estimated by adding a simple follow-up question about the certainty of responses and that cheap talk is not a generally effective approach.
Does it actually feel right? A replication attempt of the rounded price effect
Royal Society Open Science, 2018
How does the roundedness of prices affect product evaluations? The 'rounded price effect' postulates that depending on the context, rounded or non-rounded prices increase the purchase likelihood of consumers. The study presented here is a replication attempt of these findings and the proposed mediation of the effect through a sense of 'feeling right' when evaluating the product. p-Curve analysis and the R-Index are used to assess the robustness of the originally reported statistics since original data were not available. A pre-registered replication of study 5 from the original article was conducted in a sample of N = 588 participants. For both the original product and one alternative product neither an interaction between price roundedness and context, nor a mediation through 'a sense of feeling right' was found. Our results suggest that the effect is either smaller than originally reported or contingent on other, not investigated factors. Further studies might investigate contingencies in larger samples.