Context Setting and Comparative Price Advertising Effects on the Acceptable Price Range

ABSTRACT - This paper extends earlier work in the comparative price advertising area. Consumers' use of comparative price information to help form their perceptions of acceptable price levels is studied in an experiment in two contextual advertising settings (similar vs. dissimilar products). A contextual setting may serve as a background in which incoming price information will be evaluated; therefore, contextual settings influence price standards and purchase evaluations. ne results from this study indicate that comparison price advertising information can influence the development of consumers' levels of acceptable price. Generally, added price information provided by comparative price ads appear to have a greater influence on acceptable price levels; however, the context in which the price information is presented determines the extent to which the price information affects acceptable price levels.



Citation:

Robert I. Roundtree and Kent B. Monroe (1995) ,"Context Setting and Comparative Price Advertising Effects on the Acceptable Price Range", in E - European Advances in Consumer Research Volume 2, eds. Flemming Hansen, Provo, UT : Association for Consumer Research, Pages: 251-257.

European Advances in Consumer Research Volume 2, 1995      Pages 251-257

CONTEXT SETTING AND COMPARATIVE PRICE ADVERTISING EFFECTS ON THE ACCEPTABLE PRICE RANGE

Robert I. Roundtree, University of Illinois

Kent B. Monroe, University of Illinois

ABSTRACT -

This paper extends earlier work in the comparative price advertising area. Consumers' use of comparative price information to help form their perceptions of acceptable price levels is studied in an experiment in two contextual advertising settings (similar vs. dissimilar products). A contextual setting may serve as a background in which incoming price information will be evaluated; therefore, contextual settings influence price standards and purchase evaluations. ne results from this study indicate that comparison price advertising information can influence the development of consumers' levels of acceptable price. Generally, added price information provided by comparative price ads appear to have a greater influence on acceptable price levels; however, the context in which the price information is presented determines the extent to which the price information affects acceptable price levels.

In an increasingly competitive retail environment, sellers seek ways to signal superior product value during the consumer's product selection process. The use of comparative price advertisements that compare the sale price to a regular price is believed to influence consumers' judgments of value and the attractiveness of the deal (Grewal and Compeau 1992). In addition to these direct comparisons, contextual factors also influence these consumer judgments. Previous research on reference price advertisements by retailers has focused on the effects of external reference prices on consumers' price perceptions. The outcome measures for these studies have included: the believability or credibility of the reference price, perceptions of the stores' regular selling price, perceived savings, shop-around saving, and willingness to buy (Biswas and Blair 1991). In assessing the attractiveness of the deal, consumers have the propensity to make price-quality inferences, in part, based on judgments of price acceptability levels. Little research has studied the combined effects Of reference price claims and ad context on consumers' price acceptability perceptions.

Reference price effects generally have been explained through adaptation-level (Helson 1964) and assimilation-contrast (Sherif 1963; Sherif and Hovland 1961) theories. Adaptation-level theory is based on the assumption that stimuli are judged with respect to internal norms representing the pooled effects of present and past stimuli (Helson 1964). Therefore, all judgments are relative to the prevailing adaptation level. Stimuli are perceived as members of classes or categories and are judged or evaluated relative to the individual's adaptation level for that category (Monroe et a]. 1991). Monroe et al. (1991) suggest that the adaptation level denotes a region rather than a point on a continuum, and there is a changing adaptation level at every moment of time. This theory is consistent with Emery's (1970) suggestion that the adaptation level price can be considered to be the average market price or some average of the range of prices for similar products. The concept of range implies both a lower and upper limit of acceptable prices for a particular product category. Adaptation- level theory also suggests contextual factors will help determine the extent external price stimuli shift the adaptation level in their direction. Contextual factors relevant to retail advertising include the placement and size of the price claim within the ad, the semantic content of the price claim (cf. Della, Bitta, Monroe, and McGinnis 1981), the familiarity of the brand to consumers (Blair and Landon 1981), the store's price reputation (Fry and McDougall 1974), and the level of advertisement distinctiveness (Lichtenstein and Bearden (1988). Lichtenstein and Bearden (1988) have used various levels of merchant-supplicd reference prices and have found that context (e.g., consistency and distinctiveness) does affect internal price standards and purchase evaluations.

Researchers have also used assimilation-contrast theory to explain the effects of advertised reference prices. The basic tenet of assimilation-contrast theory is that new stimuli encountered by an individual are compared against a background of previous experience with the stimuli category (Sherif and Hovland 1961). This experience forms an individual's reference scale (Monroe et al. 1991). This reference scale is changed by adding new stimuli or shifting the total range of stimuli (Sherif 1963). The reference scale serves as a basis for an individual to compare and evaluate other subsequently encountered stimuli perceived as related to the reference scale stimuli (Monroe et al. 1991). In a price advertising context, consumers have latitudes of price acceptability around their belief as to what is a normal, average or expected price for the product category. A consumer introduced to a product's price claim assimilates it if the claim is within the latitude of acceptance for both the specific product and product category. Otherwise, a contrast effect occurs and the claim is less likely to be believed (Monroe and Petroshius 1981).

For the purpose of this study, context refers to the setting in which ads are presented. To illustrate this point, when consumers see reference price claims for a specific product they do not see them in isolation from claims by other product, some for the same product category and others from dissimilar categories. In a common scenario, consumers read newspapers containing multiple ads for competing products within the same product category (i.e., similar products) as well as ads not considered part of the same category (i.e., dissimilar products). Thus, a free standing insert devoted entirely to different brands of athletic shoes would be viewed as a similar context; conversely, for the same retailer, another free standing insert advertising a variety of product categories would constitute a dissimilar context.

The Acceptable Price Range

The concept of the acceptable price range is based on the assimilation-contrast effects of social judgment theory (cf. Sherif 1963; Sherif and Sherif 1967). The basic premise is buyers usually will have several acceptable prices for a considered purchase. Normally, these prices will be bounded by upper and lower end prices (Gabor and Granger 1966; Monroe and Venkatesan (1969). Lichtenstein and Bearden (1988) have defined price acceptability as "a judgment of price based on a comparison of the price cue to a range of acceptable prices stored in memory." The prices consumers find acceptable can be defined by both the general price level they find acceptable as well as the width of the range of prices within this price level that are acceptable to pay. The price level can be represented as a point estimate of' the range of prices that are acceptable. The price level can thus be viewed as analogous to a central tendency in the distribution of acceptable prices; on the other hand, price width represents the deviation of acceptable prices around the price level (Lichtenstein et al. 1988.). Adapting Monroe's (1971) definition, Rao and Sieben (1992) have conceptualized the upper price limit to be the price above which consumers consider the product to be too expensive or representative of a separate higher-priced product category , while the lower limit is the price below which consumers become suspicious of the quality of the product or representative of a separate lower-priced product category.

Comparative Price Advertising

In an attempt to get consumers to compare a "sale price" to a "reference price", advertisers use comparative price advertisements. This reference price comparison may be either an explicit (e.g., "original price/sale price" and manufacturer's suggested list price/sale price) or an implicit reference price comparison (e.g., "sale price" suggests that the original price would be higher than the sale price) (Grewal and Compeau (1992). These advertisements may be considered important because they provide the consumer with more information in the comparative advertising setting versus the non-comparative advertising scenario. Grewal and Compeau maintain that these advertisements give the consumer a base for product value comparisons by providing information which suggest the monetary worth of the product. Thus, comparative price advertisements attempt to provide consumers with a reference price (explicit or implicit) that they can use to judge an offer.

Assimilation-Contrast Theory

Most recently, assimilation-contrast theory has been used to conceptualize the effects of comparative price advertising on consumer judgment (Grewal and Compeau 1992; Grewal et a]. 1994), and the development of consumers' acceptable price range (Lichtenstein eta]. 1988; Rao and Sieben 1992). Based on previous experience individuals form a reference point or range for the stimulus category that serves as a basis for an individual to compare and evaluate other subsequently encountered stimuli perceived as related to the stimuli category. Monroe (1990) identified three different price cues that influence price judgments: the consurner's reference price, the lowest price encountered, and the highest price encountered. Prices used by individuals to make perceptual judgments about other prices are called anchoring stimuli. The idea is that an external reference price can draw the adaptation-level or reference price in its direction, or even substitute for it. Within such a reference scale there is a preferred category and this preferred category serves as a major anchor for subsequent judgments. Further, the value of the end stimuli of the stimulus series also serves as anchors for comparisons and evaluations, particularly when a reference scale has not been well established.

If new stimuli are encountered for evaluation, they may also serve as anchors in that they may result in a changing of the reference scale. Whether this changing or displacement of the reference scale toward the new stimulus produces an assimilation or a contrast effect depends on how other stimuli in the category are judged after the introduction of the new stimulus. When the perceived difference between the new stimuli and the reference scale are extreme, the new stimuli may not be perceived as belonging to the same category as the old stimuli, but rather as belonging to two entirely different categories.

Contextual Effects

As it relates to prices, contextual variables serve to provide meaning for interpreting and evaluating incoming price information. Since most ads are usually accompanied by other product ads of similar and dissimilar product categories, the evaluations of prices in specific ads may vary according to the level of advertisement distinctiveness. That is, the consumers' price judgments may differ after exposure to similar or dissimilar ads. Since evaluations of prices may vary across contexts, external reference prices, provided by comparative price advertising, may influence consumers' internal reference prices in one context (e.g. all similar ads) but not affect them in another context (e.g. all dissimilar ads). A critical question, then, is what effect will comparative price advertising's external reference prices have on consumers' internal reference prices across different advertising placement contexts. More specifically, to what extent does an ad's similar/dissimilar presentation background affect consumers' price judgment (i.e., acceptable price ranges). Several studies have examined the effects of price- comparison or reference price advertising on buyers' perceptions of value and behavior intentions (e.g. Lichtenstein and Bearden 1988; Urbany, Bearden and Weilbaker 1988; Biswas and Blair 1991). However, the majority of these studies do not address the combined effects of comparative price advertising and context on consumers' price judgments.

CONCEPTUAL BACKGROUND

The idea that consumers possess a range of acceptable prices that is bounded by a lower and upper price limit they are able and willing to pay for a product has been analytically derived from psychophysics (Monroe 1971) and theoretically derived from social judgment theory (Sherif 1963; Monroe 1971; Monroe and Venkatesan 1969). The concept of price acceptability helps to explain relationships among the concepts of perceived quality, perceived value, and willingness to buy (Monroe 1984; Monroe and Krishnan 1985). Lichtenstein et al., (1988) used assimilation contrast theory to redefine price acceptability to include comparative judgments of price cues to a range of acceptable prices stored in memory. Measures of price acceptability have generally involved consumers' evaluations of whether stated retail prices are true or fair prices (Zeithaml 1984). People can estimate a distribution of retail prices for a particular product category or specific brand, such as the lowest price at which the item can be purchased, the highest price, and the average price (Helgeson and Beatty 1987; Klein and Oglethorpe 1987; Urbany, Bearden, and Weilbaker 1988). These estimates likely provide an indication of the consumers' belief about the price of the item as well as related perceptions of product quality and purchase value.

A reference price advertisement directly asks consumers to evaluate their beliefs about the presented external reference price (Biswas and Blair 1991). For example, an ad which provides both regular and sale prices implicitly asks the consumer to possibly change his/her belief about the range of possible selling prices for a given product, and thus, affecting his/her range of acceptable prices. The added price information provided by comparative price advertisements (i.e., regular selling price) gives consumers additional price information which may either be assimilated or contrasted with their original price acceptability reference scale. Biswas and Blair claim that a consumer may change his/her belief without completely accepting the reference price claim. That is, the revised belief may reflect some discounting of the ad claim.

Consumers do not see reference price claims in isolation from claims by competing stores (Biswas and Blair 1991). Most consumers experience comparative price ads in newspapers or free standing inserts in either the context of all similar ads (e.g. all athletic shoes or all automobiles) or in a dissimilar setting (e.g. a major retail catalog). In making price judgments about a specific product, consumers must evaluate both comparative price information and other product price information provided. Similar to price acceptability research, comparative price advertising studies have used assimilation-contrast theory to show that price comparison promotions do affect buyers' perceptions of the deal offered to them (Urbany, Bearden and Weilbaker 1988; Lichtenstein and Bearden 1988).

Because consumers' value perceptions influence what prices are acceptable to them, the information they use to form their quality and value perceptions will also influence their acceptable prices. Comparative price advertisements provide consumers a base for product value perceptions when the regular or usual comparative prices are used. Therefore, it can be reasoned that comparative price advertisements may influence consumers' range of price acceptability. Moreover, assimilation-contrast theory would suggest that the contextual (i.e., background for presentation of focal stimuli) situation will be one basis for whether the change or displacement of the reference scale (i.e., shifts in the acceptable price limits) toward the new stimulus. Thus, contextual variables help to set the frame in which incoming price information will be evaluated, and, therefore, influence price standards and purchase evaluations. When asked to make price judgments for a specific product (i.e., athletic shoes), presented in a given setting (i.e., similar or dissimilar products), consumers will use relevant price information (i.e., similar products) to revise their price judgments. Assimilation-contrast theory would suggest that consumers introduced to a product's price claim will assimilate it if the claim is within their latitude of acceptance for the product as to the acceptability. Thus, for a given product, when consumers make judgments of advertised prices, price information for dissimilar products will have less influence on their price evaluations compared to consumers who are exposed to advertised prices for all similar products.

Therefore, the direction and magnitude of change in consumers' price acceptability limits will depend on their initial price limits and the relative advertised price information for the product category. Moreover, these changes in their price limits will depend on the amount and type of price information available to them.

HYPOTHESES AND RESEARCH METHOD

These general propositions were tested in a specific set of controlled contextual conditions. Therefore, the nature of the research design will be presented prior to the specific hypotheses tested.

Experimental Design

We used a 2x2 between-subjects experimental design. There were two price comparison conditions (present or absent), and two advertisement contexts (similar or dissimilar products advertised). In the price comparison advertisements, four regular prices ($75, $60,$45 and $30) and four corresponding sale prices ($50,$40,$30 and $20) - each ad had a 33 % price reduction. The target product had a regular price of $75 and a sale price of $50. In the no price comparison condition, only the four sale prices were used.

In this experiment, each subject was exposed to four print advertisements in one of four conditions. The target print advertisement appeared in both the similar and dissimilar ad context. In addition, two conditions provided comparative price information labeled as "regular" price while the other two conditions only showed "sale" price information. Specifically, we used a Nike brand athletic shoe as the target brand and three other athletic shoe brands for the similar context condition (Reebok, Avia and LA Gear). For the dissimilar context, we used an espresso machine (Krups), duffel bag (High Sierra), and watch (Timex). These products were selected to provide advertisements for dissimilar products while maintaining consistent prices across the four ads in all conditions.

The rationale for the following two predictions come from the notion that subjects' internal price scales will be displaced toward the new stimuli. However, in the situation with only sale prices, the subjects will need to estimate the magnitude of the price reduction to determine the potential unadvertised regular price. It isexpected that in the dissimilar condition, they will estimate a regular price higher than the $50 sale price. This subjective estimate will then serve to displace the price limits upward. For the similar product condition, it is expected that the four sale prices will provide some bounds on the upward regular price estimates to the extent that their internal price scale will move downward.

These results are anticipated because the presence of comparison prices provides more price information to consumers about the product category and because assimilation-contrast theory suggests that similar context price information may be assimilated into consumers' range of acceptable prices. Conversely, assimilation contrast theory would suggest that in a dissimilar setting, the added price information (both regular and sale price) will be categorized differently with the information provided in the target product ad, since the other products are deemed to be in a different product category. Thus, the dissimilar context will not lead to a significant change in the acceptable price range.

Hypotheses

The hypotheses presented here assume that subjects in each of the four conditions begin with approximately equivalent upper and lower acceptable price limits for athletic shoes. Thus, depending on the specific advertising context, there will be differential price information available for athletic shoes. For example, the price comparison ads in the similar context presented eight prices for athletic shoes ranging from $75 to $20, whereas the no price comparison ads in the dissimilar context presented only the $50 sale price for the Nike shoe. Further, the regular and sale prices for all other products advertised were less than the Nike regular and sale prices. Therefore, under these specific conditions it is hypothesized:

H1: When the target product has the highest advertised prices, then in conditions of price comparison advertisements,

a. lite upper and lower acceptable price limits for subjects exposed to similar products ads will decreuse, while

b. the upper and lower acceptable price limits for subjects exposed to dissimilar products ads will increase.

The rationale for these two predictions come from the notion that internal reference prices move in the direction of new price stimuli. In Hla., the four ads for athletic shoes will have regular prices ranging from $75 - $30 and sale prices ranging from $50 -$20. It is expected that this distribution of prices will displace the subjects' internal reference price scale downward. In the dissimilar condition, Ii I b., the subjects will be exposed to the two prices for Nike athletic shoes, $75 and $50. It appears more likely in the dissimilar situation that these two prices would lead to some upward displacement of their internal reference price scale.

H2: Own lite target product has the highest advertised prices, then in conditions of no price comparison advertisements,

a. the upper and lower acceptable price limits for subjects exposed to similar product ads will decrease, while

b. the upper and lower acceptable price limits for subjects exposed to dissimilar product ads will increase.

The two hypotheses offered reflect the effect that comparative price information may have on consumers' range of acceptable prices, which in turn will be contingent upon the contextual setting in which the information is presented. Thus, the mere presence of price information may not be enough for the consumer to incorporate this information into his/her price reference scale. This may be particularly true if consumers view the setting as a signal that the information is inconsistent with the evaluated target product.

Pretesting

Pretest One. The first Pretest was used to select a brand from the target product category as well as to assess the reliability of the measures to be used in the experiment. In test 1, sixty undergraduate students were randomly assigned to either a brand present or brand absent condition. The original brand (Reebok athletic shoes) was manipulated by presenting an advertisement with either the brand logo (and any other apparent brand cues) present or absent. The subjects were instructed to look at the advertisement while answering a series of questions measuring their range of price acceptability, expected price, internal reference price, product category knowledge, perceived quality, perceived value, perceived benefits, perceived monetary sacrifice, price confidence, price knowledge, believability, willingness to search, and willingness to buy. The results of the first test did not show a significant difference in dependent measures between the two subject groups, indicating that the Reebok brand manipulation was inadequate.

A factor analysis was performed to determine the dimensionality of the various constructs. Since most of the measures we used have been used extensively in the pricing research literature, the results of the factor analysis did not result in a significant reduction in variables. Also, the perceived value, perceived quality, and perceived benefits constructs had acceptable alpha coefficients (approximately .80).

Pretest Two. The second pretest used a Nike brand athletic shoe to determine if its brand name and consumer recognition was better than the brand used in pretest 1. In addition, we changed the wording of some measures and modified certain procedures to reflect the results of pretest 1

Before being exposed to the advertising stimulus, subjects were asked to complete several measures assessing their range of price acceptability for a product in the target category. This measurement provided a baseline of the subjects' range of acceptable prices so that we could assess any change in this range resulting from exposure to the ads and the price information. The results of the second pretest suggested that the Nike brand name provided a sufficient manipulation of brand in the target category. Finally, the debriefing of the subjects provided insight on clarifying and simplifying the wording of the measures for our constructs.

Procedures

The two independent variables (similar or dissimilar ad context and absence or presence of comparison price) were manipulated in a laboratory setting using a set of four full color print advertisements. The 84 subjects were told that they were participating in an "advertising survey" and were randomly assigned to one of the four conditions. The subjects were undergraduate male and female business students who received extra credit for participation.

The survey instrument was administered on personal computers. Each subject was seated at a computer terminal with a copy of the stimulus material faced down. The subjects were first instructed to read the screen instructions and to proceed to the first phase which assessed their product category knowledge and measured their prc-existing range of acceptable prices and expected price for the target product category.

After completing these scales they were instructed to look at a series of four advertisements. After reviewing the ads each subject was instructed to ask the experiment administrator to move them on to the next phase (this was done by pressing a "hot key" known only to the administrator). The subject then proceeded to a new set of questions based on the target advertisement, designed to measure their range of price acceptability. Upon completion of the experiment a short debriefing session was conducted to ascertain whether the subjects followed instructions and to determine whether they noticed and read all the price related information.

Stimulus Material

The color ads were created by scanning original newspaper/ magazine ads into a Macintosh computer. The manipulated ads were then printed using a color laser printer.

Dependent Measures

The above experimental design was used to measure the effect of comparison price information and contextual cues on subjects' range of price acceptability. The price acceptability range was measured by asking each subject to select each price they "consider acceptable to pay for a pair of athletic shoes". The range of prices available for each subject's selection ranged from $25 to $163. This range was selected as a result of the researchers' recent inquiry at a national retail athletic shoe store to determine the common athletic shoe types, styles and prices.

We also asked open ended questions about what the subjects saw in the ad to check whether the target brand ad was appropriately recognized and used to answer the questions. We also debriefed each subject to determine if there was any ambiguity in the stimulus or measurement instrument as well as whether there was any hypothesis guessing or other artifacts that might threaten the validity of the results.

RESULTS AND ANALYSIS

Results

Table I shows the mean values and (standard deviations) related to the limits of the acceptable price range, by condition. Since a measure of expected price was taken at the outset, it was treated as a covariate. Thaler (1985) labels expected price as the internal standard with which consumers compare incoming price stimulus; thus, external prices seem to displace the expected price in their direction. Therefore, we determined this measure's effect on our main outcome variables.. The analysis of covariance, however, revealed that it did not have a significant effect on the upper limit of the acceptable price range F(1,83)=.83, p>.10) nor the lower limit of the acceptable price range F(1,83)=1.44, p=.10. The covariate was therefore dropped from the following analysis.

Analysis of variance using the post lower limit as the dependent variable showed a significant interaction between advertising context and comparison price information F(1,83)=4.361, p<.05. Also, when the upper limit was used as a dependent variable, a significant interaction between advertising context and comparison price information was found F(1,83)=4.131, p<.05.

Comparison Price

In conditions of price comparison ads, as predicted, subjects' lower and upper acceptable price limits decreased when exposed to the similar context setting. Specifically, the lower acceptable price limit declined $4.48, or 13.5%; this decrease was significant, p<.05. The upper limit decline by $3.67, or 4.8%, however, the change was not significant, p>.10. Subjects exposed to the dissimilar context increased both their lower and upper acceptable price limits. The upper price limit increased $4.95, or 6.3 percent of the original values while the lower limit increased $.67. Neither of these changes were significant, p>.10. As argued above, there were more and lower prices in the similar context situation, leading to a decrease in subjects' upper and lower acceptable price limits. As demonstrated in Figure 1, the post upper, F(1,41)=3.028, p<10, and lower, F(1,41)=28.339, P<.05, price limits were significantly less in a similar context situation.

TABLE 1

MEAN VALUES AND (STANDARD DEVIATIONS)

No Comparison Price

When no comparison price information was given, as predicted, subjects' lower and upper acceptable price limits increased when exposed to the dissimilar context setting. Although the magnitude of acceptable price range changes were substantial, upper ($3.91, 5.7%) and lower ($1.95, 6.4%), they were not significant, p>.10. Subjects in the similar context condition exhibited a decline in their lower acceptable price limit, as predicted ($2.14 or 5.2%), but the change is not significant. However, the upper price limit for these subjects increased (2.9%), which is opposite to that suggested by H2a. This result perhaps resulted from subjects' higher estimation of the regular selling price, leading to an upward displacement of their upper price limits. As shown in figure 1, in the price comparison condition, the post upper and lower price limits are significantly higher in the dissimilar context. However, in the no price comparison conditions there are no significant differences in the post price limits between the similarity and dissimilarity contexts.

DISCUSSION

Generally, the results provide support for the hypotheses and suggest that the effects of comparison price information could be moderated by the context in which an ad is presented. The interaction between comparison price information and advertising context suggests that under price comparison conditions consumers' lower limit of the acceptable price range may decrease in a similar advertising context. This result implies that consumers use all available price information (i.e., regular and sale prices) when the context provides prices for products are considered part of the same consideration set. In the no comparison price condition, where regular prices are not presented, consumers do not have the benefit of additional price information; thus, there is less opportunity for the external price stimuli to change their internal reference price judgments. Consequently, consumers mainly must rely on the sale price information and will assimilate it when the ads are considered part of the same consideration set. If consumers estimate the magnitude of the price reduction to determine the potential unadvertised regular price, these subjective price estimates likely will serve to displace the upper price limits upward.

CONCLUSIONS AND FUTURE RESEARCH

The results from this study indicate that comparison price advertising information can be influential in the development of consumers' levels of acceptable prices. Generally, more price information seems to have a greater influence on price levels; however, the context in which the information is presented will influence the extent to which price information affects acceptable price levels. Additionally, the absence of regular price information may lead consumers to adjust their upper acceptable price limits upward.

Comparison price advertising presently is very common. Thus, marketers may want to maximize the effectiveness of such ads by partly controlling the setting in which their ads are presented. Although this may be a very unrealistic task, the merits of knowing the potential effects of contextual situations, such as those presented in this experiment, and their impact on consumers' use of price information are important. This study suggests two variables that contribute to our understanding of consumers' establishing acceptable prices for a specific product category.

The decline in the lower price limit for the similar context conditions can be partly explained by the amount of price information consumers consider as related to the target ad presented. Thus, in the similar context conditions, the products were viewed as close alternatives to each other and the price information as an indicator for products in the athletic shoe category. Therefore, price information from the lower priced athletic shoe ads served to pull down consumers' judgments of acceptable prices. It is this additional price information, in the form of comparison prices, that helps account for the substantially lower limit in the comparison price condition versus the no comparison price condition.

FIGURE 1

PRE-POST MEANS BY CONDITION

One of the key theoretical assumptions this study makes is the use of assimilation-contrast theory to conceptualize the effects of comparative price advertising on consumer's judgments and the development of their acceptable price range. As suggested by Biswas and Blair (1991), we extend previous work on comparative price advertising to include a more realistic presentation of such ads (i.e., in the context of other ads). An interesting extension of this work would be to incorporate Thaler's (1985) theory of consumer choice to determine the effects of transaction value (actual price less internal reference price) and acquisition value (tradeoff of perceived quality and advertised selling price) on consumers' development of their acceptable price range.

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Authors

Robert I. Roundtree, University of Illinois
Kent B. Monroe, University of Illinois



Volume

E - European Advances in Consumer Research Volume 2 | 1995



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G9. The Voice From Afar: How Reverberation Affects Consumer Cognition

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