The influence of self-decided prices on expected quality

Across a variety of products and services, this research investigates whether self-decided prices (which the consumer selects to pay) influence product expectations, similarly to the way a marketer-provided price does. Clearly, product expectations should influence self-decided prices, such that more favorable product expectations should increase the consumer’s willingness to pay. However, across eight studies, we find that self-decided prices also affect product expectations. This suggests that consumers treat their own willingness-to-pay as a signal similar to market prices, and that they update their product expectations based on the price they happen to decide to pay for a product or service. As a host of research has found that consumers’ willingness-to-pay is often affected by the context in which they generate it, our research implies that this context subsequently affects consumer expectations. This effect cannot be explained by self-perception theory or cognitive dissonance theory; rather, it reflects consumers’ overreliance on the price–quality heuristic, resulting from their tendency to use marketer-provided prices as a proxy for product quality. We discuss the theoretical contributions and managerial implications of our findings.