How Small Is Zero Price? the True Value of Free Products

Kristina Shampan'er, MIT

How small is zero price? The true value of free products

Kristina Shampan’er, MIT

 In a series of experiments, participants choose between buying a piece of high-end chocolate, buying a piece of low-end chocolate for a smaller price, and buying nothing.  For some participants, both prices are equally reduced, so that the lower price becomes zero.  A cost-benefit model predicts that the proportions of participants choosing each of the two chocolates should weakly increase when prices are equally reduced.  In reality, whereas the proportion of participants choosing the cheaper chocolate dramatically increases, the proportion of participants choosing the more attractive chocolate dramatically decreases.  Several economic and psychological explanations for the effect are considered.
[ to cite ]:
Kristina Shampan'er (2006) ,"How Small Is Zero Price? the True Value of Free Products", in NA - Advances in Consumer Research Volume 33, eds. Connie Pechmann and Linda Price, Duluth, MN : Association for Consumer Research, Pages: 254-255.