Most preference construction research studies the response mode of choice. While such research is important, relatively little preference construction research has addressed the implications of constructing willingness to pay. Understanding willingness to pay is important for pricing because choice does not necessarily produce the same results or insights as willingness to pay. This research begins to extend the current literature on the construction of willingness to payby investigating how it is influenced by the dispersion of quality in product menus. Two experiments demonstrate that willingness to pay is influenced by relative quality (i.e., an alternative's quality relative to other alternatives in the menu). Specifically, these two experiments demonstrate that willingness to pay for an alternative in a menu can be manipulated without changing the objective quality of those alternatives because willingness to pay is correlated with an alternative's quality z-score. This result is an artifact of the difficulty of translating psychological values (preferences) into numerical values (willingness to pay) combined with the comparative nature of the menu context.
The existence of choice overload in the behaviour of online consumers is investigated through an experimental product category (electronic pencil sharpeners) on a fully functional online retail website for office supplies that was created for the field experiment. Emails were sent to potential customers with an assortment of product descriptions and links that led to a product category landing page on the retail website where visitors were then presented with an assortment of products. We find that the likelihood of click-through (either in the email or on the landing page) at first increases with the number of choices presented and then decreases consistent with choice overload. However, we also find that click-through subsequently increases as the number of choices increases after overload occurs. This suggests that another effect is also at work in the choice situations. We provide an explanation and evidence for this post-decline increase in clickthrough -specifically, as the number of link choices increases, not only does choice overload increase, but also the promise of richer information, which can help resolve or reduce the overload for the mere 'low cost' of a click.
This article investigates the effects of ordinal product ratings (i.e., product ratings such as stars, diamonds, etc.) when they are superfluous, meaning they are arbitrary and redundant. It finds that ratings do influence willingness to pay even when they are superfluous. When superfluous product ratings are included in a menu, they prompt individuals to categorize products by rating; this categorization exaggerates willingness to pay for products in the highest and lowest ratings tiers (i.e., at the extremes). In the study reported here, participants indicated their willingness to pay for multiple products in five product categories while the presence of superfluous ratings is manipulated. Results reveal an expansion effect; that is, the mere presence of superfluous product ratings in a menu can expand the range of willingness to pay for the products in the menu without influencing perceived quality. Results further reveal the natural consequence of the expansion effect, the rating effect; that is, changing a product's superfluous rating can change willingness to pay for that product, even when its quality remains constant. These findings suggest that prior research overstates the information effects of product ratings and that firms may be able to act more strategically when deciding: 1) whether to include ratings in their menus; 2) what decision rule they use to assign ratings; and 3) how to craft their product menus to maximize profits.
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