Why are Consumers Less Loss Averse in Internal than External Reference Prices?

Oest, Rutger van

doi:10.1016/j.jretai.2012.08.003

Cited by 21 publications

(8 citation statements)

References 44 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…The contextual component includes the different prices of products within the same product category (Mazumdar and Papatla, 1995). This formulation of reference price, based on the current price of some contextual good or service, is denoted the "external reference price" (Hardie et al, 1993;van Oest, 2013). It is important to note, however, that some empirical evidence suggests that these two mechanisms operate simultaneously and should be assessed jointly (Mazumdar and Papatla, 2000).…”

Section: Theorymentioning

confidence: 99%

The exploration of hotel reference prices under dynamic pricing scenarios and different forms of competition

Viglia

Mauri

Carricano

2016

International Journal of Hospitality Management

View full text Add to dashboard Cite

The reference price, used by consumers to evaluate market prices, has tremendous relevance in dynamic pricing. Reconciling current heterogeneous theories and studies on reference prices, this paper analyzes the impact of hotel price sequences on consumers' reference prices through a lab and a field experiment. Experiment 1 tests the importance of retrospective price evaluations, while Experiment 2 evaluates the impact of three forms of competition: (i) simultaneous behavior, where firms adjust prices simultaneously; (ii) leader-follower behavior, where one firm acts as the leader; and (iii) independent behavior, where each player takes its rival's strategy as given and seeks to maximize its own profits. The results show that consumers decrease their reference price when competing hotels adjust their prices simultaneously. Relevant managerial implications are drawn for the hospitality industry, which is affected by the presence of online travel agencies that announce the daily rates offered by each competitor. Keywords IntroductionSuppose that Carol wants to book a hotel room and begins checking prices (hotel rates) over the Internet. After several searches, she realizes that there is a certain degree of price variability each time she checks. To judge the prices she is offered, she can recall the prices she may have seen in the past, the prices paid for rooms at the same hotel, and/or the prices charged by similar competing hotels. What she has seen or paid in the past, along with the prices of comparable hotels, will influence her price evaluation.The issue of customers' price evaluations-how customers perceive prices and their variations-has become an important topic in hospitality management, particularly due to the widespread adoption of revenue management techniques by the lodging and travel industry.Dynamic pricing practices are now common and have become more feasible as Internet purchasing behavior has increased (Abrate et al., 2012). The widespread use of dynamic pricing is partly attributable to online tools, by which hotels can easily adjust prices in real time depending on the number of available rooms, the inventory and prices of close competitors, and other contextual indicators. However, though these pricing practices may benefit both sellers and buyers, consumers may perceive dynamic pricing as unfair because it produces a variety of rates for what appear to be identical products, such as the same hotel room (Choi and Mattila, 2005).The reference price is the standard against which consumers evaluate current product prices to assess their attractiveness (Monroe, 1973). Reference price has been the subject of a large body of research by both economists and marketing scholars. It can be conceptualized as a price expectation based on customers' memories of previous information (Mazumdar et al., 2005) or 2 as the normative price-the price considered a "fair" charge for the product (Bolton et al., 2003;Campbell, 1999).Several studies have underlined the importance of including customers' refe...

show abstract

Section: Theorymentioning

confidence: 99%

The exploration of hotel reference prices under dynamic pricing scenarios and different forms of competition

Viglia

Mauri

Carricano

2016

International Journal of Hospitality Management

View full text Add to dashboard Cite

show abstract

“…Speci c causes for this effect have been identi ed. Most prominently, loss aversion is lower for experts (Abdellaoui, Bleichrodt, & Kammoun, 2013) or if losses are faced more frequently (van Oest, 2013). Loss aversion is also reduced following recent gains (Barberis, Huang, & Santos, 2001) or if greater attention is attributed to the gain (Jarnebrant, 2012).…”

Section: Objective Versus Subjective Use Of Rewards: Prospect Theorymentioning

confidence: 99%

Why the Three-Point Rule Failed to Sufficiently Reduce the Number of Draws in Soccer: An Application of Prospect Theory

Riedl

Heuer²,

Strauß³

2015

Journal of Sport and Exercise Psychology

View full text Add to dashboard Cite

Incentives guide human behavior by altering the level of external motivation. We apply the idea of loss aversion from prospect theory (Kahneman & Tversky, 1979) to the point reward systems in soccer and investigate the controversial impact of the three-point rule on reducing the fraction of draws in this sport. Making use of the Poisson nature of goal scoring, we compared empirical results with theoretically deduced draw ratios from 24 countries encompassing 20 seasons each (N = 118.148 matches). The rule change yielded a slight reduction in the ratio of draws, but despite adverse incentives, still 18% more matches ended drawn than expected, t(23) = 11.04, p < .001, d = 2.25, consistent with prospect theory assertions. Alternative point systems that manipulated incentives for losses yielded reductions at or below statistical expectation. This provides support for the deduced concept of how arbitrary aims, such as the reduction of draws in the world's soccer leagues, could be more effectively accomplished than currently attempted.

show abstract

“…Specifically, the results presented herein reveal that customized pricing In addition, the present research contributes to an existing body of marketing and consumer research on reference prices (Bolton & Ockenfels, 2000;Kamins, Dreze, & Folkes, 2004;van Oest, 2013).…”

Section: Resultsmentioning

confidence: 59%

Priced just for me: The role of interpersonal attachment style on consumer responses to customized pricing

David

Bearden

Haws

2017

J of Consumer Behaviour

View full text Add to dashboard Cite

Customized pricing is an increasing phenomenon in the marketplace, but little is known about factors influencing consumer responses to customized pricing. The present paper seeks to gain an understanding of how, why, and when this emerging pricing mechanism may offer benefits. Specifically, this research focuses on how consumers respond to customized pricing tactics and, more specifically, on how interpersonal attachment orientations impact consumers' responses to prices offered in the presence of a customized pricing program. The results of 3 studies suggest that customized pricing programs likely create an expectation for a discounted price among securely attached individuals, such that these consumers are dissatisfied paying the shelf price in the presence of a customized pricing program. Overall, the results provide evidence that, although customized pricing programs are often used to enhance consumer evaluations, they may not always be effective. This paper advances prior research by integrating important considerations for both pricing and customization strategies based on individual and situational differences in attachment orientations.

show abstract

Why are Consumers Less Loss Averse in Internal than External Reference Prices?

Cited by 21 publications

References 44 publications

The exploration of hotel reference prices under dynamic pricing scenarios and different forms of competition

The exploration of hotel reference prices under dynamic pricing scenarios and different forms of competition

Why the Three-Point Rule Failed to Sufficiently Reduce the Number of Draws in Soccer: An Application of Prospect Theory

Priced just for me: The role of interpersonal attachment style on consumer responses to customized pricing

Contact Info

Product

Resources

About