strengthening the influence of advertised reference prices through information priming the use of advertised reference price promotions such as regularly 119 99 sale price 39 99 is ubiquitous in the marketplace thirty years of research supports the conclusion that advertised reference prices e g 119 99 exert an influence on consumers responses to offer prices e g 39 99 via their assimilative influence on consumers internal reference prices the present research provides an enriched account of this assimilation process specifically three studies show that increasing the overlap in information made accessible by the advertised reference price and information made accessible by the offer price increases the influence of the information primed by the advertised reference price on the construction of the internal reference price consequently the offer price is considered more attractive the identification of this process provides insight into additional variables that moderate the influence of advertised reference prices on downstream deal evaluations implications for theory practice and public policy are discussed

further evidence on the marginal gains in accuracy of alternative levels of specificity of the producer price indexes in the process of evaluating the reliability of the current cost data required to be disclosed by its statement no 33 fasb 1979 the financial accounting standards board fasb is soliciting empirical evidence on the accuracy of price indexes for estimating the current cost of machinery and equipment see fasb 1983 sunder and waymire 1983 presented some preliminary evidence that the marginal gains in accuracy from increasing the specificity of price indexes utilized as measurement techniques for three approximations of the u s economy were not substantial their hypothetical economies consisted of portfolios of 15 68 and 199 commodities represented by selected price indexes from the two digit three digit and four digit producer price indexes ppi respectively most of the indexes they selected represent inventorytype commodities in the absence of actual price data the sunder and waymire 1983 methodology provides a means to assess only the relative efficiency of various aggregations of the ppi to estimate the current costs of assets

pennies a day the effect of temporal reframing on transaction evaluation to increase transaction compliance marketers sometimes temporally reframe the cost of a product from an aggregate one time expense to a series of small ongoing expenses often in spite of the fact that the physical payments remain aggregated this temporal reframing is identified in this article as the pennies a day pad strategy a two step consumer decision making process of 1 comparison retrieval and 2 transaction evaluation is posited to explain the effectiveness of this strategy in a series of laboratory studies general support for pad effectiveness across a range of product categories and specific support for the proposed two step model was found the pad framing of a target transaction is shown to systematically foster the retrieval and consideration of small ongoing expenses as the standard of comparison whereas an aggregate framing of that same transaction is shown to foster the retrieval and consideration of large infrequent expenses this difference in retrieval is shown to significantly influence subsequent transaction evaluation and compliance

contextual influences on perceptions of merchant supplied reference prices two contextual variables that have theoretical roots in information processing attribution and social judgment theories were manipulated along with three levels of merchant supplied reference price in a 2 2 3 analysis of variance design results support the hypothesized effects of consistency and distinctiveness as contextual variables that influence internal price standards and purchase evaluations the three price levels resulted in a curvilinear pattern of results for the purchase evaluation and source credibility dependent variables as hypothesized however contrary to assimilation contrast theory the impact of the merchant supplied reference price on estimates of normal and fair prices was monotonic

the effect of explicit reference points on consumer choice and online bidding behavior sellers often explicitly suggest to buyers that they compare one option to other reference options building on the notion that loss aversion is more pronounced when comparisons are explicit rather than implicit we propose that the mere fact that consumers are explicitly told to make particular comparisons induces more risk averse cautious choice and bidding behavior this proposition was supported in a field experiment involving real online auctions in which comparisons among listings either were done spontaneously by bidders or were encouraged using an explicit instruction to compare the focal auction with adjacent listings results showed that explicit reference points 1 diminished the influence of adjacent auction prices on the focal auction s price 2 led participants to submit fewer lower and later bids 3 increased the incidence of sniping 4 decreased bidding frenzy and 5 decreased the tendency to bid on multiple items simultaneously the impact of explicit comparisons on risk averse behavior was further tested in a very different context using a laboratory choice experiment in that study explicit instructions to compare option sets increased the tendency to choose the compromise low risk and all average alternatives we discuss the theoretical and practical implications of this research

says who how the source of price information and affect influence perceived price un fairness abstract three experiments show that the source of price change information whether human or nonhuman moderates the effect of price change on perceptions of price fairness both inferences of the marketer s motive and stimulus induced affect mediate the effects of the source and price change opportunity and motivation to process also affect the relative influence of inferred motive and affect this research demonstrates antecedent roles of both price source and affect

on the impossibility of informationally efficient markets comment in a recent paper in this review sanford grossman and joseph stiglitz challenge the efficient markets notion that in an asset market at any time prices fully reflect all available information p 404 the purpose of this comment is to argue that certain theorems and comments of grossman and stiglitz do not necessarily follow when an error in the specification of the informed trader s demand function for the risky asset is corrected in theorem 5 b p 401 grossman and stiglitz show that when informed traders have perfect information concerning a risky asset s yield no overall equilibrium will exist that is there will be no equilibrium value for the proportion of informed traders x inspection of equations 8 8 and 9 p 396 helps to give intuitive reasons why this is so if no individual purchases an observation of the information point 0 that is if x 0 then for a sufficiently small value of c the cost of obtaining an observation of the information point 0 an individual could increase his expected utility by purchasing the information if some fraction of traders purchase the information point 0 that is if x 0 from equation 8 it is seen that as 0 2 0 as informed traders obtain better information small movements in 0 have a nearly infinite effect upon the informed trader s demand for the risky asset and hence upon the asset s price thus according to grossman and stiglitz for a fixed x 0 as q2 0 the price system becomes perfectly informative as to the informed trader s observation of 0 thus for x 0 and a 2 0 no individual will wish to purchase 0 at cost c but for xa c2 0 and small c it pays an individual to purchase 0 clearly then for q 2 0 no equilibrium exists equation 8 plays a crucial role in theorem 5 b however equation 8 ignores the fact that x1i the ith informed trader s demand for the risky asset is constrained by his wealth woi in fact if the informed trader has perfect information so that 0 is the return on the risky asset then the informed trader simply invests in the asset with the higher yield thus for ue2 0 equation 8 ought to read

overchoice and assortment type when and why variety backfires almost universally research and practice suggest that a brand that increases its product assortment or variety should benefit through increased market share in this paper we show this is not always the case we introduce the construct assortment type and demonstrate that the effect of assortment size on brand share is systematically moderated by assortment type we define an alignable assortment as a set of brand variants that differ along a single compensatory dimension such that choosing from that assortment only requires within attribute trade offs in contrast we define a nonalignable assortment as a set of brand variants that simultaneously vary along multiple noncompensatory dimensions demanding between attribute trade offs in turn we argue that an alignable assortment can efficiently meet the diverse tastes of consumers thereby increasing brand share but that a nonalignable assortment increases both the cognitive effort and the potential for regret faced by a consumer thereby decreasing brand share we term this effect overchoice across three studies we provide evidence of overchoice and tie the effect to the effort and regret brought about by nonalignability in the process we demonstrate that simplification of information presentation reversibility of choice and a reduction in underlying nonalignability serve to reduce or eliminate this effect

zero as a special price the true value of free products when faced with a choice of selecting one of several available products or possibly buying nothing according to standard theoretical perspectives people will choose the option with the highest cost benefit difference however we propose that decisions about free zero price products differ in that people do not simply subtract costs from benefits but instead they perceive the benefits associated with free products as higher we test this proposal by contrasting demand for two products across conditions that maintain the price difference between the goods but vary the prices such that the cheaper good in the set is priced at either a low positive or zero price in contrast with a standard cost benefit perspective in the zero price condition dramatically more participants choose the cheaper option whereas dramatically fewer participants choose the more expensive option thus people appear to act as if zero pricing of a good not only decreases its cost but also adds to its benefits after documenting this basic effect we propose and test several psychological antecedents of the effect including social norms mapping difficulty and affect affect emerges as the most likely account for the effect

free offer cheap product a selective accessibility account on the valuation of free offers many consumer price promotions including new product launches offer a product for free or for a low discounted price along with a required purchase this research demonstrates that consumers willingness to pay for the product after the promotion is retracted is higher when it was offered for free than when it was offered at a low discounted price the underlying reasoning is that the price of the product on promotion is used as a natural anchor for value estimation however when the product is offered for free i e zero price consumers are less likely to consider the value of the product and are influenced by anchors such as the price of the focal purchase in contrast to some prior findings a free offer does not devalue the product at all and at a minimum devalues the product less than if it were offered for a low discounted price

the price of free dom consumer sensitivity to promotions with negative contextual influences past research has shown that monetary promotions e g discounts are more likely to be processed relative to and integrated with the original product price than are free promotions we posit that because of this difference free promotions are more focal and salient than monetary promotions in a set of three experiments we demonstrate that this salience results in free promotions being less susceptible than equivalent monetary discounts to negative contextual information on quality that can potentially lower purchase intentions we show that this effect can be reversed when respondents focus on other pieces of information that diminish the salience of the free promotion

constructive consumer choice processes consumer decision making has been a focal interest in consumer research and consideration of current marketplace trends e g technological change an information explosion indicates that this topic will continue to be critically important we argue that consumer choice is inherently constructive due to limited processing capacity consumers often do not have well defined existing preferences but construct them using a variety of strategies contingent on task demands after describing constructive choice consumer decision tasks and decision strategies we provide an integrative framework for understanding constructive choice review evidence for constructive consumer choice in light of that framework and identify knowledge gaps that suggest opportunities for additional research

speculation optimism and differential information speculative trading has for quite some time been an important question for at least two reasons firstly as a positive question of whether speculative behavior basically is caused by differences in information or by differences in aversion to risk secondly the question is related to the informational efficiency of decentralized market systems if access to information not currently available to the market makes possible a speculative profit the incentive to acquire information may be too excessive from a social point of view the aim of this paper is to clarify the relationship between information and speculation in his seminal article on information acquisition in decentralized market economies hirshleifer 12 showed that the private value of acquiring information depends critically on the speculative profits to be made from this information hirshleifer 12 distinguished between information foreknowledge which affects productive decisions and information which only has implications for exchange similarly fama and laffer 5 distinguish between operational information which improves a firms operating decisions and trading information which only affects trading decisions it is argued due to the speculative profits to be made from having access to information not available to the market that there are excessive private incentives to acquire information without any relevance for productive decisions

information diversity and market behavior the paper addresses two major issues raised by information diversity in a speculative market first we analyze what property of an investor s information leads to an expected speculative profit and show that independence is more important than accuracy second we consider whether the market price must become fully efficient in the sense that every investor s information is accurately discounted when traders use it rationally as an information source we prove that for any information structure there is a unique equilibrium weighting of investor beliefs at which the price is fully efficient and also every trader s expected profit is zero except for special structures however this equilibrium need not be attained in finite time much of modern capital market theory depends heavily on the assumption that investors know the expected values variances and covariances of asset returns although the assumption of homogeneous expectations is a conventional one and necessary for many theoretical results it is not one which can be offered with much confidence real world investors have access to differing information and may also disagree on the correct interpretation of widely held information when asset returns are assumed to be governed by a known probability distribution many features of trading in real world markets are eliminated from consideration there is no role for information gathering and no way for an investor to profit from having superior information indeed this term has no real meaning since all relevant information is contained in the known returns distribution speculative trading is also hard to explain without divergence of opinion a speculator who thought the market price impounded all available information would never trade against it with heterogeneous information we lose some of the neat results of standard capital market theory but new questions can be addressed about how information diversity among investors affects the markets in which they participate one issue concerns the impact of informational differences on investor profits investors who are better informed than others or are better able to evaluate widely held information should be able to earn higher returns all effort devoted to security analysis and market research depends on the belief that this is so but what makes one investor s information superior to another s beyond the circular observation that those investors with consistent profits must be better informed than those with losses do investors with inferior information however measured continually lose money until they are squeezed out of the market or can an

opportunity cost neglect to properly consider the opportunity costs of a purchase consumers must actively generate the alternatives that it would displace the current research suggests that consumers often fail to do so even under conditions promoting cognitive effort various cues to consider opportunity costs reduce purchase rates and increase the choice share of more affordable options sensitivity to such cues varies with chronic dispositional differences in spending attitudes we discuss the implications of these results for the marketing strategies of economy and premium brands

adding asymmetrically dominated alternatives violations of regularity and the similarity hypothesis an asymmetrically dominated alternative is dominated by one item in the set but not by another adding such an alternative to a choice set can increase the probability of choosing the item that dominates it this result points to the inadequacy of many current choice models and suggests product line strategies that might not otherwise be intuitively plausible

an empirical test of the effect of asset aggregation on valuation accuracy significant increases in the general price level during the past two decades have precipitated an ongoing debate concerning possible inadequacies of financial reports and taxation laws based on historical costs many proposed solutions have centered on various methods of asset valuation two american accounting association committees 1964 and 1966 suggested that direct methods of valuation estimation appraisal market quotation were theoretically preferred but that adjustments by price indices could be used as surrogates regarding the latter however there is some uncertainty about how many price indices should be used in the valuation process some suggest that a number of price indices will be necessary to ensure reasonably accurate valuations arthur andersen co 1979 in contrast others suggest that the use of numerous indices may not significantly improve valuation accuracy boersema 1974 and sunder s 1978 analysis shows that the use of additional indices sometimes results in less accurate valuation the purpose of this paper is to offer empirical evidence concerning the effect of the number of price indices on the accuracy of valuation in section 1 i briefly review prior works that have addressed similar research questions the methodology is described in section 2 followed by the results and analysis in section 3 section 4 contains the limitations and conclusions of the study

the global configuration of a speculative trading operation an empirical study of foreign exchange trading this paper proposes a theory of firm boundaries based on fore knowledge development and exploitation in speculative or informed trading foreign exchange trading provides this study s empirical context from research on information economics we suggest optimal speculative trading operations are multiunit and globally dispersed alternatively transaction cost economics suggests atomistic actors prevail in the market for fungible commodities like currencies we also develop competing hypotheses about information technology s effects on foreign exchange trading operations speculation arguments predict that the global scope of trading operations will expand after the introduction of generic information technologies transaction cost economics proposes that when atomistic actors do not prevail trading operations will contract after this introduction we test competing predictions with models of the expansion contraction and net change in a firm s global dispersion we estimate these models with data from the population of banks worldwide engaged in interbank foreign exchange currency fx trading from 1974 to 1993 our results uncover two types of firms those that approach the atomistic actor of transaction cost economics and those that resemble the globally dispersed multiunit configuration from our speculation discussion these results encourage reflection on how the theory of the firm differs when firms trade to produce versus speculate

a range theory account of price perception it is well accepted in the behavioral pricing literature that a consumer s perception of the attractiveness of a market price depends on a comparison of the market price to an internal reference price the rationale underlying this dynamic has its roots in adaptation level theory however consistent with range theory we postulate that a consumer s assessment of the attractiveness of a market price may also depend on a comparison of the market price to the endpoints of the evoked price range four experiments provide evidence that variance in the width of the evoked price range affects price attractiveness judgments in the absence of any variance in the internal reference price of theoretical importance findings from the present article suggest that pricing theory is in need of augmentation in order to account for this effect of managerial relevance these findings suggest that changes in context can bring about changes in the evoked price range and perceptions of the attractiveness of a market price

when retailing and las vegas meet probabilistic free price promotions a number of retailers offer gambling or lottery type price promotions with a chance to receive one s entire purchase for free although these retailers seem to share the intuition that probabilistic free price promotions are attractive to consumers it is unclear how they compare to traditional sure price promotions of equal expected monetary value we compared these two risky and sure price promotions for planned purchases across six experiments in the field and in the laboratory together we found that consumers are not only more likely to purchase a product promoted with a probabilistic free discount over the same product promoted with a sure discount but that they are also likely to purchase more of it this preference seems to be primarily due to a diminishing sensitivity to the prices in addition we find that the zero price effect transaction cost and novelty considerations are likely not implicated this paper was accepted by yuval rottenstreich judgment and decision making

the limits of fungibility relational schemata and the value of things four experiments test predictions on endowment and mental accounting effects of a theoretical perspective that stresses the symbolic relational significance for consumer transactions and that posits the placement of qualitative boundaries on fungibility although people accepted proposals to buy objects acquired in market pricing relationships as routine the same proposals in communal sharing authority ranking and equality matching relationships triggered distress and erratically high dollar valuations symbolic ownership history also moderated valuations in a purely market setting and the effects of symbolic relational source of income extended even to spending decisions examination of the model s ordinal predictions revealed stronger effects for equality matching than for authority ranking relationships

the informational effects of restrictions on short sales some empirical evidence in a world of heterogeneous investors a competitive financial market has two major functions first it is the mechanism by which ownership of the existing supply of risky assets is distributed among investors this is the role which is analyzed in detail by the standard capital asset pricing model capm and its many extensions the second important market function is to aggregate the diverse information held by different investors into a single price most versions of the capm eliminate the information aggregation function by assuming that investors hold homogeneous beliefs with respect to the probability distribution of asset returns exceptions which deal with some aspects of the problem are lintner 7 grossman 4 grossman and stiglitz 5 and figlewski 1 3

the red and the black mental accounting of savings and debt in the standard economic account of consumer behavior the cost of a purchase takes the form of a reduction in future utility when expenditures that otherwise could have been made are forgone the reality of consumer hedonics is different when people make purchases they often experience an immediate pain of paying which can undermine the pleasure derived from consumption the ticking of the taxi meter for example reduces one s pleasure from the ride we propose a double entry mental accounting theory that describes the nature of these reciprocal interactions between the pleasure of consumption and the pain of paying and draws out their implications for consumer behavior and hedonics a central assumption of the model which we call prospective accounting is that consumption that has already been paid for can be enjoyed as if it were free and that the pain associated with payments made prior to consumption but not after is buffered by thoughts of the benefits that the payments will finance another important concept is coupling which refers to the degree to which consumption calls to mind thoughts of payment and vice versa some financing methods such as credit cards tend to weaken coupling whereas others such as cash payment produce tight coupling our model makes a variety of predictions that are at variance with economic formulations contrary to the standard prediction that people will finance purchases to minimize the present value of payments our model predicts strong debt aversion that they should prefer to prepay for consumption or to get paid for work after it is performed such pay before sequences confer hedonic benefits because consumption can be enjoyed without thinking about the need to pay for it in the future likewise when paying beforehand the pain of paying is mitigated by thoughts of future consumption benefits contrary to the economic prediction that consumers should prefer to pay at the margin for what they consume our model predicts that consumers will find it less painful to pay for and hence will prefer flat rate pricing schemes such as unlimited internet access at a fixed monthly price even if it involves paying more for the same usage other predictions concern spending patterns with cash charge or credit cards and preferences for the earmarking of purchases we test these predictions in a series of surveys and in a conjoint like analysis that pitted our double entry mental accounting model against a standard discounting formulation and another benchmark that did not incorporate hedonic interactions between consumption and payments our model provides a better fit of the data for 60 of the subjects the discounting formulation provides a better fit for only 29 of the subjects even when allowing for positive and negative discount rates the pain of paying we argue plays an important role in consumer self regulation but is hedonically costly from a hedonic perspective the ideal situation is one in which payments are tightly coupled to consumption so that paying evokes thoughts about the benefits being financed but consumption is decoupled from payments so that consumption does not evoke thoughts about payment from an efficiency perspective however it is important for consumers to be aware of what they are paying for consumption this creates a tension between hedonic efficiency and what we call decision efficiency various institutional arrangements such as financing of public parks through taxes or usage fees play into this tradeoff a producer developing a pricing structure for their product or service should be aware of these two conflicting objectives and should try to devise a structure that reconciles them

quality perceptions and asymmetric switching between brands rotating indifference curves are used to induce an income effect that favors superior brands at the expense of inferior brands in a discrete choice model when calibrated on scanner panel data the model yields an objective measure of brand quality which is related to the rate of rotation the model also leads to asymmetric responses to price promotions where switching up to high quality brands is more likely than switching down the model is capable of nesting the standard logit model and is similar to a nested logit model when there exists clusters of brands of like quality the model is used to explore a product line pricing decision where profits are maximized subject to the constraint that consumer utility is maintained

incommensurate resources not just more of the same abstract the pricing literature is replete with research that focuses on how consumers respond to sales promotions when both the reference level and the change are expressed in dollar terms i e discounts the psychophysics of pricing suggests that changes in monetary magnitude are not based on their absolute level but rather on their deviation from some reference level or how the change is framed often however a promotion is presented in nonmonetary terms e g a premium when two resources are delivered simultaneously but in different currencies e g receive a free razor with the purchase of a can of shaving cream the marginal value of the nonmonetary incremental benefit may be difficult to evaluate in relation to the focal product or its price therefore the value of the premium may be less likely than a comparable discount to be viewed in a relative sense and thus less likely to suffer from diminishing marginal returns this research explores how people often fail to exhibit the sam

promotional bundles and consumers price judgments when the best things in life are not free a series of experiments examined the amount that consumers were willing to pay for products bundled together in a promotion describing one of the disparate products in the bundle as free decreased the price consumers were willing to pay for each product when sold individually however a freebie offer did not influence the overall price for the bundle of disparate products a finding robust across two different settings and populations the differential effect of freebies is explained by varying judgment difficulty with the price being easier to arrive at for just a single product than for the combination consistent with this explanation factors that influence judgment difficulty the salience of the company s motive for offering the freebie and time pressure to make a judgment moderated the effects of a free offer on the amount consumers were willing to pay

effects of seller supplied prices on buyers product evaluations reference prices in an internet auction context a field experiment investigated the impact of two external reference points under the seller s control on the final price of an auction when an item s seller specified a high external reference price a reserve price the final bid was greater than when the seller specified a low external reference price a minimum bid when the seller provided both high and low reference prices the reserve influenced the final bid more the low reference price led to a lower outcome compared to when the seller did not communicate any reference price the number of bidders influenced outcomes in the absence of seller supplied reference prices

when do price promotions affect pretrial brand evaluations the authors investigate the conditions in which price promotions affect pretrial brand evaluations a price promotion is theorized to be informative about brand quality when it stands out because i

the deadweight loss of christmas when economists comment on holiday gift giving it is usually to condone the healthy effect of spending on the macroeconomy however an important feature of gift giving is that consumption choices are made by someone other than the final consumer a potentially important microeconomic aspect of gift giving is that gifts may be mismatched with the recipients preferences in the standard microeconomic framework of consumer choice the best a gift giver can do with say 10 is to duplicate the choice that the recipient would have made while it is possible for a giver to choose a gift which the recipient ultimately values above its price for example if the recipient is not perfectly informed it is more likely that the gift will leave the recipient worse off than if she had made her own consumption choice with an equal amount of cash in short gift giving is a potential source of deadweight loss this paper gives estimates of the deadweight loss of holiday gift giving based on surveys given to yale undergraduates i find that holiday gift giving destroys between 10 percent and a third of the value of gifts while these recipients may be unrepresentative of the u s population their gifts are not necessarily unrepresentative holiday expenditures average 40 billion per year implying that a conservative estimate of the deadweight loss of christmas is a tenth as large as estimates of the deadweight loss of income taxation i also explore how deadweight loss and the tendency to give cash gifts vary with the relationship and age difference between giver and recipient i find that gifts from friends and significant others are most efficient while noncash gifts from members of the extended family are least efficient and destroy a third of their value i develop a simple expected utility model to explain the decision to give cash as opposed to in kind gifts the data are consistent with the model cash gifts are most common from the sorts of givers whose noncash gifts have the lowest expected value to recipients given their cost and high variability in recipient valuation

an integrated product planning model for pricing and bundle selection using markov decision processes and data envelope analysis abstract when bundling products during the product planning stage there are a number of possible combinations that can be offered to customers consider a firm that offers n distinctive products then there are 2 n n 1 possible bundling combinations now if we wish to make pricing and bundle selection decisions keeping in my mind limited inventory and a finite time horizon then the size of the state space could be very large and finding an optimal solution could be impossible to tackle this issue we formulate an integrated model that utilizes a markov decision process and data envelope analysis bundle selections are made using data envelope analysis in each decision epoch once the efficient bundles are selected they are priced by solving a markov decision process using dynamic programming numerical examples are solved to exhibit the model s potential in solving real world problems

coherent arbitrariness stable demand curves without stable preferences economic theories of valuation generally assume that prices of commodities and assets are derived from underlying fundamental values for example in finance theory asset prices are believed to reflect the market estimate of the discounted present value of the asset s payoff stream in labor theory the supply of labor is established by the tradeoff between the desire for consumption and the displeasure of work finally and most importantly for this chapter consumer microeconomics assumes that the demand curves for consumer products chocolates cds movies vacations drugs and so forth can be ultimately traced to the valuation of pleasures that consumers anticipate receiving from these products because it is difficult as a rule to measure fundamental values directly empirical tests of economic theory typically examine whether the effects of changes in circumstances on valuations are consistent with theoretical prediction for example whether labor supply responds appropriately to a change in the wage rate whether compensated demand curves for commodities are downward sloping or whether stock prices respond in the predicted way to share repurchases however such comparative static relationships are a necessary but not sufficient condition for fundamental valuation e g summers 1986 becker 1962 was perhaps the first to make this point explicitly when he observed that consumers choosing commodity bundles randomly from their budget set would nevertheless produce downward sloping demand curves

accuracy of linear valuation rules in industry segmented environments industry vs economy weighted indexes abstract the comparative ability of valuation rules using economy weighted versus industry weighted price indexes to estimate the unobserved economic value of a basket of assets in modelled industry weighted indexes do not necessarily provide valuations of higher accuracy than economy weighted indexes dominance depends on 1 the relative magnitude of the mean and variability of price changes and 2 the magnitude of errors of measurement in the current price data larger measurement errors favor economy weighted indexes larger mean and variability of prices changes favor industry weighted indexes

mistake 37 the effect of previously encountered prices on current housing demand based on contrast effects studies from psychology we predicted that movers arriving from more expensive cities would rent pricier apartments than those arriving from cheaper cities we also predicted that as people stayed in their new city they would get used to the new prices and would readjust their housing expenditures countering the initial impact of previous prices we found support for both predictions in a sample of 928 movers from the psid alternative explanations based on unobserved wealth and taste and on imperfect information are ruled out

conscious and nonconscious comparisons with price anchors effects on willingness to pay for related and unrelated products abstract exposing consumers to extreme prices can influence the price they are willing to pay for both related and unrelated products drawing on previous theories of anchoring and adjustment and selective accessibility of judgment relevant knowledge the authors provide an account of both asymmetries in the impact of price anchors across product categories and contingencies in the occurrence of these asymmetries four studies show the deliberate consideration of price anchors that can play a key role in whether the effect of the anchors will generalize across product categories specifically an explicit comparison of a product to a price anchor increases the accessibility of features that represent a product available at this price in turn these thoughts influence the price that consumers are willing to pay for these products in the absence of this deliberation however anchors influence both related and unrelated products provided no other cognitive activity occurs in the interim

the effect of plausible and exaggerated reference prices on consumer perceptions and price search this article examines whether advertisers regular price claims affect consumer perceptions and price search behavior experiments involving simulated shopping via personal computers indicate that compared to an ad with no reference price an ad with a plausible reference price raised subjects estimates of the advertiser s regular price and the perceived offer value an exaggerated reference price had generally the same positive effects on perception as a plausible reference price even for the more skeptical subjects further when subjects were presented with an advertised sale price above the lowest expected price the exaggerated reference price increased the percentage of subjects who purchased the product from the advertiser without checking other stores prices

the influence of price discount versus bonus pack on the preference for virtue and vice foods abstract the authors find that consumers prefer a bonus pack to a price discount for virtue foods but they prefer a price discount to a bonus pack for vice foods prior research has shown that all else being equal consumers prefer bonus packs to price discounts the authors propose that this preference does not hold for vice food because consumers cannot generate good justifications for buying such food when a bonus pack is offered because this would mean consuming more of the vice however a price discount on a vice food can be justified because it acts as a guilt mitigating mechanism for virtue foods the absence of both anticipated postconsumption guilt and the resultant need to justify leads consumers to prefer a bonus pack to a price discount the authors demonstrate the proposed effect and test its underlying process across five experiments