IDEAS home Printed from https://ideas.repec.org/a/kap/mktlet/v23y2012i3p661-669.html
   My bibliography  Save this article

Battle royal: Zero-price effect vs relative vs referent thinking

Author

Listed:
  • Juan Nicolau

Abstract

This article confronts three psychological influences: relative thinking, referent thinking, and the zero-price effect. The experiment conducted in the context of bundles with complementary components, confirms previous evidence around the dominance patterns between relative and referent thinking when the bargain is a discount; however, when the discount is changed to a free product (worth the same as the discount), the zero-price effect arises. Specifically: (1) if actual price coincides with expected price, relative thinking is the norm, unless the zero-price effect appears; (2) if actual price moderately deviates from expected price, referent thinking is superior to any other effects, relative thinking and the zero-price effect; and (3) if the deviation is extreme, a battle royal among influences takes place: relative thinking beats referent thinking as long as the zero-price effect does not appear. If the zero-price effect is present, it will cancel referent thinking and reverse relative thinking. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Juan Nicolau, 2012. "Battle royal: Zero-price effect vs relative vs referent thinking," Marketing Letters, Springer, vol. 23(3), pages 661-669, September.
  • Handle: RePEc:kap:mktlet:v:23:y:2012:i:3:p:661-669
    DOI: 10.1007/s11002-012-9169-2
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11002-012-9169-2
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s11002-012-9169-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zhang, Shi & Fitzsimons, Gavan J., 1999. "Choice-Process Satisfaction: The Influence of Attribute Alignability and Option Limitation," Organizational Behavior and Human Decision Processes, Elsevier, vol. 77(3), pages 192-214, March.
    2. Kristina Shampanier & Nina Mazar & Dan Ariely, 2007. "Zero as a Special Price: The True Value of Free Products," Marketing Science, INFORMS, vol. 26(6), pages 742-757, 11-12.
    3. Mauricio M. Palmeira, 2011. "The Zero-Comparison Effect," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 38(1), pages 16-26.
    4. Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages 251-278, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Feess, Eberhard & Müller, Helge & Schumacher, Christoph, 2016. "Estimating risk preferences of bettors with different bet sizes," European Journal of Operational Research, Elsevier, vol. 249(3), pages 1102-1112.
    2. Peter Andersen & Fei L. Weisstein & Kent B. Monroe, 2024. "Math anxiety effects on consumer purchase decisions: the role of framing," Marketing Letters, Springer, vol. 35(3), pages 367-380, September.
    3. Ju-Young Kim & Katharina Kaufmann & Manuel Stegemann, 2014. "The impact of buyer–seller relationships and reference prices on the effectiveness of the pay what you want pricing mechanism," Marketing Letters, Springer, vol. 25(4), pages 409-423, December.
    4. Lehe, Lewis J. & Devunuri, Saipraneeth, 2022. "Large Elasticity at Introduction," Research in Transportation Economics, Elsevier, vol. 95(C).
    5. Dimitrios I. Maditinos & Alexandra V. Tsinani & Željko Šević, 2015. "Managerial optimism and the impact of cash flow sensitivity on corporate investment: The case of Greece," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 8(2), pages 35-54, October.
    6. Cools, Mario & Fabbro, Yannick & Bellemans, Tom, 2016. "Free public transport: A socio-cognitive analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 86(C), pages 96-107.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wardley, Marcus & Alberhasky, Max, 2021. "Framing zero: Why losing nothing is better than gaining nothing," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 90(C).
    2. Mao, Wen, 2016. "Sometimes “Fee” Is Better Than “Free”: Token Promotional Pricing and Consumer Reactions to Price Promotion Offering Product Upgrades," Journal of Retailing, Elsevier, vol. 92(2), pages 173-184.
    3. Nina Mazar & Kristina Shampanier & Dan Ariely, 2017. "When Retailing and Las Vegas Meet: Probabilistic Free Price Promotions," Management Science, INFORMS, vol. 63(1), pages 250-266, January.
    4. Santana, Shelle & Thomas, Manoj & Morwitz, Vicki G., 2020. "The Role of Numbers in the Customer Journey," Journal of Retailing, Elsevier, vol. 96(1), pages 138-154.
    5. Ju-Young Kim & Katharina Kaufmann & Manuel Stegemann, 2014. "The impact of buyer–seller relationships and reference prices on the effectiveness of the pay what you want pricing mechanism," Marketing Letters, Springer, vol. 25(4), pages 409-423, December.
    6. Euy-Young Jung & Chulwoo Baek & Jeong-Dong Lee, 2012. "Product survival analysis for the App Store," Marketing Letters, Springer, vol. 23(4), pages 929-941, December.
    7. Miriam Krieger & Stefan Felder, 2013. "Can Decision Biases Improve Insurance Outcomes? An Experiment on Status Quo Bias in Health Insurance Choice," IJERPH, MDPI, vol. 10(6), pages 1-18, June.
    8. Güth, W., 1997. "Boundedly Rational Decision Emergence -A General Perspective and Some Selective Illustrations-," SFB 373 Discussion Papers 1997,29, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    9. Freeman, Steven F., 1997. "Good decisions : reconciling human rationality, evolution, and ethics," Working papers WP 3962-97., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    10. Alexandra Rausch & Alexander Brauneis, 2015. "It’s about how the task is set: the inclusion–exclusion effect and accountability in preprocessing management information," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 23(2), pages 313-344, June.
    11. Kumar, Alok, 2007. "Do the diversification choices of individual investors influence stock returns?," Journal of Financial Markets, Elsevier, vol. 10(4), pages 362-390, November.
    12. Jensen, Robert & Lleras-Muney, Adriana, 2012. "Does staying in school (and not working) prevent teen smoking and drinking?," Journal of Health Economics, Elsevier, vol. 31(4), pages 644-657.
    13. Greiff, Matthias & Egbert, Henrik, 2016. "A Survey of the Empirical Evidence on PWYW Pricing," MPRA Paper 68693, University Library of Munich, Germany.
    14. Strauss, Jason, 2007. "Return-of-Premium Endorsements for Living-Benefits Insurance Policies: Rational or Irrational?," MPRA Paper 11103, University Library of Munich, Germany.
    15. Ellen Garbarino & Robert Slonim, 2007. "Preferences and decision errors in the winner’s curse," Journal of Risk and Uncertainty, Springer, vol. 34(3), pages 241-257, June.
    16. Elie Matta & Jean McGuire, 2008. "Too Risky to Hold? The Effect of Downside Risk, Accumulated Equity Wealth, and Firm Performance on CEO Equity Reduction," Organization Science, INFORMS, vol. 19(4), pages 567-580, August.
    17. Gavan J. Fitzsimons & Donald R. Lehmann, 2004. "Reactance to Recommendations: When Unsolicited Advice Yields Contrary Responses," Marketing Science, INFORMS, vol. 23(1), pages 82-94, September.
    18. Giuseppe Pernagallo & Benedetto Torrisi, 2020. "A theory of information overload applied to perfectly efficient financial markets," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 14(2), pages 223-236, October.
    19. Prieto, Marc & Caemmerer, Barbara & Baltas, George, 2015. "Using a hedonic price model to test prospect theory assertions: The asymmetrical and nonlinear effect of reliability on used car prices," Journal of Retailing and Consumer Services, Elsevier, vol. 22(C), pages 206-212.
    20. Moshe Levy & Haim Levy, 2013. "Prospect Theory: Much Ado About Nothing?," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 7, pages 129-144, World Scientific Publishing Co. Pte. Ltd..

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:mktlet:v:23:y:2012:i:3:p:661-669. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.