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How social comparison influences reference price formation in a service context

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  • Viglia, Giampaolo
  • Abrate, Graziano

Abstract

What is the influence on reference price when the source of price information is anonymous versus social? This article investigates the formation of reference prices given an observed sequence of past prices in a service context. An experimental study suggests that, considering the same price information, if the source is social (i.e., the prices paid by colleagues), then consumers want to pay less. More specifically, social comparison changes the way individuals weigh information, attributing more importance to the lowest historical prices and to the range in price variations.

Suggested Citation

  • Viglia, Giampaolo & Abrate, Graziano, 2014. "How social comparison influences reference price formation in a service context," Journal of Economic Psychology, Elsevier, vol. 45(C), pages 168-180.
    • Handle: RePEc:eee:joepsy:v:45:y:2014:i:c:p:168-180
    DOI: 10.1016/j.joep.2014.09.003
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    References listed on IDEAS

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    Cited by:

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    2. Martin Gellerstedt & T. Arvemo, 2019. "The impact of word of mouth when booking a hotel: could a good friend’s opinion outweigh the online majority?," Information Technology & Tourism, Springer, vol. 21(3), pages 289-311, September.
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    4. Rabbanee, Fazlul K. & Roy, Rajat & Sharma, Piyush, 2022. "Contextual differences in the moderating effects of price consciousness and social desirability in pay-what-you-want (PWYW) pricing," Journal of Business Research, Elsevier, vol. 141(C), pages 13-25.
    5. Roy, Rajat & Das, Gopal, 2022. "The role of contextual factors in increasing Pay-What-You-Want payments: Evidence from field experiments," Journal of Business Research, Elsevier, vol. 139(C), pages 1540-1552.
    6. Lou, Youcheng & Strub, Moris S. & Li, Duan & Wang, Shouyang, 2021. "The impact of a reference point determined by social comparison on wealth growth and inequality," Journal of Economic Dynamics and Control, Elsevier, vol. 127(C).
    7. Qin, Chang-Xiong & Liu, Zhao, 2022. "Reference price effect of partially similar online products in the consideration stage," Journal of Business Research, Elsevier, vol. 152(C), pages 70-81.
    8. Jose Rojas-Fallas & J. Forrest Williams, 2020. "Wage Differences Matter: An Experiment of Social Comparison and Effort Provision when Wages Increase or Decrease," Games, MDPI, vol. 11(4), pages 1-12, December.
    9. Liu, Chao & Chen, Weidong, 2019. "Decision making in green supply chains under the impact of the stochastic and multiple-variable dependent reference point," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 128(C), pages 443-469.
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    More about this item

    Keywords

    Reference price; Social comparison; Dynamic pricing; Prelec weighting function;
    All these keywords.

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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