Incidental Prices and Their Effect on Consumer Willingness to Pay

ABSTRACT - Past research has explored how external reference prices affect consumer perceptions (i.e., their Ainternal@ reference price) and consequently the price they are willing to pay for a product or service. Historically, research has examined the effects of exposure to prices for the same product, the same brand, or at the very least products within the same category as price cues. This research explores the effects of incidental prices on the consumer’s willingness to pay. We define incidental prices as prices advertised, offered, or paid for unrelated goodsBgoods that are neither viewed by the seller nor the buyer as an indicator of what may or should be paid for the item in question. More specifically, we examine how the prices for products that the buyer encountered unintentionally can affect the buyer’s willingness to pay for the product they intend to buy, or the focal good. This research demonstrates how incidental prices can act as an anchor that serves to shift an individual’s reservation price, or the upper bound of what they are willing to pay, often unbeknownst to the buyer. Unlike the external reference prices studied thus far, an incidental price is neither intended nor presumed to affect consumer decision-making.

Citation:

Joseph C. Nunes and Peter Boatwright (2002) ,"Incidental Prices and Their Effect on Consumer Willingness to Pay", in NA - Advances in Consumer Research Volume 29, eds. Susan M. Broniarczyk and Kent Nakamoto, Valdosta, GA : Association for Consumer Research, Pages: 528.

Advances in Consumer Research Volume 29, 2002     Page 528

INCIDENTAL PRICES AND THEIR EFFECT ON CONSUMER WILLINGNESS TO PAY

Joseph C. Nunes, University of Southern California

Peter Boatwright, Carnegie Mellon University

ABSTRACT -

Past research has explored how external reference prices affect consumer perceptions (i.e., their "internal" reference price) and consequently the price they are willing to pay for a product or service. Historically, research has examined the effects of exposure to prices for the same product, the same brand, or at the very least products within the same category as price cues. This research explores the effects of incidental prices on the consumer’s willingness to pay. We define incidental prices as prices advertised, offered, or paid for unrelated goodsBgoods that are neither viewed by the seller nor the buyer as an indicator of what may or should be paid for the item in question. More specifically, we examine how the prices for products that the buyer encountered unintentionally can affect the buyer’s willingness to pay for the product they intend to buy, or the focal good. This research demonstrates how incidental prices can act as an anchor that serves to shift an individual’s reservation price, or the upper bound of what they are willing to pay, often unbeknownst to the buyer. Unlike the external reference prices studied thus far, an incidental price is neither intended nor presumed to affect consumer decision-making.

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