A substantial body of research evidence has now accumulated in the reference price literature. One stream of research has identified the antecedents of reference price and has assessed their effects through experimentation. Others have calibrated a variety of reference price models on panel data and reported the effects on brand choice and other purchase decisions. In this article, the authors review the published literature on reference price in both the behavioral and modeling streams. They offer an integrative framework to review prior research on (1) the formation of reference price, (2) retrieval and use of reference price, and (3) influences of reference price on various purchase decisions and evaluations. In doing so, the authors examine the influences of consumers' prior purchase history and contextual moderators, such as specific purchase occasions, promotional environment of the store, and product category characteristics. They summarize the key findings, identify the unresolved issues, and offer an agenda for further research, which includes a set of testable propositions. They also identify the methodological challenges that face reference price research. In the concluding section, the authors discuss the managerial implications of reference price research.

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Empirical research on reference price has typically assumed that consumers use either an internal reference price (IRP) or an external reference price (ERP), but not both, in brand choice decisions. In this article, the authors assume that consumers use both IRP and ERP but may consider one of them more salient than the other. The authors develop a model that segments consumers on the basis of the differences in the importance they assign to each type of reference price as well as in their brand preferences and responses to marketing-mix variables. The authors calibrate the model on data for four categories: liquid detergents, ketchup, tissue, and yogurt. In all four categories, the proposed model performs significantly better than the one that assumes that consumers use either IRP or ERP exclusively. The authors discuss the managerial implications of this finding.

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In this paper, we examine the persuasive influences of online user comments (or word-of-mouth) and of the reviews by movie critics on moviegoers’ evaluation of to-be-released movies. Two distinctive features of this study are: (1) moviegoers are considered to be heterogeneous in their movie going frequency and (2) word-of-mouth and critical reviews are concurrently available, and the views expressed in the two messages are in conflict. Using three experiments with natural stimuli, we find that the persuasive effect of online word-of-mouth is stronger on infrequent than on frequent moviegoers, especially when it is negative (Study 1). The effect of negative word-of-mouth on infrequent moviegoers is enduring even in the presence of positive reviews by movie critics (Study 2). The relative influence of word-of-mouth and critical reviews are asymmetric with infrequent moviegoers more influenced by word-of-mouth, while frequent moviegoers more influenced by the reviews (Study 3). We validate this source–segment alignment through secondary data analysis.

Indirect network externality (INE) effect exists when the utility of a product increases with the greater availability of compatible complementary products. We demonstrate that INE effects can vary by product attributes, with externality-sensitive attributes gaining more from increased availability of complementary products than other attributes. Past research has assumed that the benefit of increased availability of complementary products (e.g., software) accrues to theproduct (e.g., hardware). Utilizing data covering a period from 1985 to 1995 on compact disc player prices, attributes, and CD titles releases, and using a hedonic price approach, we find significant positive interactions between CD title availability and two attributes of the CD player, namely, changer capacity and its oversampling rate. In addition to INE-attribute interactions, increased availability of CD titles is found to have a significant positive impact on the overall price of CD players, which is consistent with past research. Collectively, these effects of INE have helped reduce the yearly decline in the price of CD players. The finding that INE effects differentially affect different attributes can help managers in decisions such as pricing, timing of introduction, and changing the levels of INE-sensitive attributes.Indirect Network Externality, Hedonic Price, Externality Sensitive Attributes, CD Player Prices

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