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A Closer look at reference price: A commentary

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  • Angela Y. Lee

    (Northwestern University)

Abstract

In their historical overview of behavioral pricing research, Cheng and Monroe (2013) advanced five principles related to the concept of reference price: 1) there is a latitude of price indifference around a fuzzy reference price; 2) consumers may have a specific reference price for each product, sold at a particular channel, at a particular time or season, displayed amidst a particular array of other products; 3) the encounter of a new price results in the reference price shifting in the direction of the new price, resulting in an assimilation effect; 4) consumers are differentially sensitive to a price increase versus price decrease; 5) the sequential order and the distribution of prices have different effects on the reference price. This commentary highlights some of the interesting aspects of these concepts and discusses potential avenues for future research.

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  • Angela Y. Lee, 2013. "A Closer look at reference price: A commentary," AMS Review, Springer;Academy of Marketing Science, vol. 3(3), pages 151-154, September.
    • Handle: RePEc:spr:amsrev:v:3:y:2013:i:3:d:10.1007_s13162-013-0053-x
    DOI: 10.1007/s13162-013-0053-x
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    References listed on IDEAS

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    1. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    2. Richard H. Thaler, 2008. "Commentary—Mental Accounting and Consumer Choice: Anatomy of a Failure," Marketing Science, INFORMS, vol. 27(1), pages 12-14, 01-02.
    3. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    4. Dan Ariely & George Loewenstein & Drazen Prelec, 2003. ""Coherent Arbitrariness": Stable Demand Curves Without Stable Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 73-106.
    5. Raghunathan, Rajagopal & Irwin, Julie R, 2001. "Walking the Hedonic Product Treadmill: Default Contrast and Mood-Based Assimilation in Judgments of Predicted Happiness with a Target Product," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 28(3), pages 355-368, December.
    6. Lillian L. Cheng & Kent B. Monroe, 2013. "An appraisal of behavioral price research (part 1): price as a physical stimulus," AMS Review, Springer;Academy of Marketing Science, vol. 3(3), pages 103-129, September.
    7. Herr, Paul M, 1989. "Priming Price: Prior Knowledge and Context Effects," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 16(1), pages 67-75, June.
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    Cited by:

    1. Lillian L. Cheng & Kent B. Monroe, 2013. "Some reflections on an appraisal of behavioral price research (part 1)," AMS Review, Springer;Academy of Marketing Science, vol. 3(3), pages 155-159, September.

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