IDEAS home Printed from https://ideas.repec.org/p/iik/wpaper/215.html
   My bibliography  Save this paper

Adjacent Price Anchoring and Consumer’s Willingness to Pay: A Bayesian Approach

Author

Listed:
  • Atanu Adhikari

    (Indian Institute of Management Kozhikode)

Abstract

Considerable research on consumers' use of psychological reference points exists in pricing literature. Researchers examining brand choice have reasoned that reference point is based on past prices of the brand. We argue that consumers’ reference prices is motivated by the adjacent price of the product at point of display rather than any other reference prices in the context. This research studies the effect of adjacent price on consumers’ willingness to pay and purchase intention. This research considers consumer level heterogeneity since price sensitivity and consumers’ willingness to pay vary among individual. Hierarchical Bayes methodology is used to incorporate heterogeneity. This study shows significant difference in consumers’ willingness to pay when a medium priced brand is placed adjacent to a high priced brand as against adjacent to a moderately priced brand.

Suggested Citation

  • Atanu Adhikari, 2016. "Adjacent Price Anchoring and Consumer’s Willingness to Pay: A Bayesian Approach," Working papers 215, Indian Institute of Management Kozhikode.
  • Handle: RePEc:iik:wpaper:215
    as

    Download full text from publisher

    File URL: https://iimk.ac.in/websiteadmin/FacultyPublications/Working%20Papers/215fullp.pdf?t=58
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Huber, Joel & Puto, Christopher, 1983. "Market Boundaries and Product Choice: Illustrating Attraction and Substitution Effects," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 10(1), pages 31-44, June.
    2. Peter J. Lenk & Wayne S. DeSarbo & Paul E. Green & Martin R. Young, 1996. "Hierarchical Bayes Conjoint Analysis: Recovery of Partworth Heterogeneity from Reduced Experimental Designs," Marketing Science, INFORMS, vol. 15(2), pages 173-191.
    Full references (including those not matched with items on IDEAS)

    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. repec:cup:judgdm:v:8:y:2013:i:2:p:136-149 is not listed on IDEAS
    2. Robert Zeithammer & Peter Lenk, 2006. "Bayesian estimation of multivariate-normal models when dimensions are absent," Quantitative Marketing and Economics (QME), Springer, vol. 4(3), pages 241-265, September.
    3. Charles Cunningham & Ken Deal & Yvonne Chen, 2010. "Adaptive Choice-Based Conjoint Analysis," The Patient: Patient-Centered Outcomes Research, Springer;International Academy of Health Preference Research, vol. 3(4), pages 257-273, December.
    4. Suren Basov & Svetlana Danilkina & David Prentice, 2020. "When Does Variety Increase with Quality?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 56(3), pages 463-487, May.
    5. Chang, Shin-Shin & Chang, Chung-Chau & Liao, Yen-Yi, 2015. "A joint examination of effects of decision task type and construal level on the attraction effect," Journal of Economic Psychology, Elsevier, vol. 51(C), pages 168-182.
    6. Nasim Mousavi & Panagiotis Adamopoulos & Jesse Bockstedt, 2023. "The Decoy Effect and Recommendation Systems," Information Systems Research, INFORMS, vol. 34(4), pages 1533-1553, December.
    7. John Liechty & Duncan Fong & Eelko Huizingh & Arnaud Bruyn, 2008. "Hierarchical Bayesian conjoint models incorporating measurement uncertainty," Marketing Letters, Springer, vol. 19(2), pages 141-155, June.
    8. Yu, Jie & Goos, Peter & Vandebroek, Martina, 2011. "Individually adapted sequential Bayesian conjoint-choice designs in the presence of consumer heterogeneity," International Journal of Research in Marketing, Elsevier, vol. 28(4), pages 378-388.
    9. Kick, Markus & Littich, Martina, 2015. "Brand and Reputation as Quality Signals on Regulated Markets," EconStor Preprints 182503, ZBW - Leibniz Information Centre for Economics.
    10. Theodoros Evgeniou & Constantinos Boussios & Giorgos Zacharia, 2005. "Generalized Robust Conjoint Estimation," Marketing Science, INFORMS, vol. 24(3), pages 415-429, May.
    11. Thomas Otter & Joe Johnson & Jörg Rieskamp & Greg Allenby & Jeff Brazell & Adele Diederich & J. Hutchinson & Steven MacEachern & Shiling Ruan & Jim Townsend, 2008. "Sequential sampling models of choice: Some recent advances," Marketing Letters, Springer, vol. 19(3), pages 255-267, December.
    12. Seidl, C. & Traub, S., 1996. "Rational Choice and the Relevance of Irrelevant Alternatives," Other publications TiSEM 26452450-9ecd-45b4-bc45-b, Tilburg University, School of Economics and Management.
    13. Burbano, Vanessa & Padilla, Nicolas & Meier, Stephan, 2020. "Gender Differences in Preferences for Meaning at Work," IZA Discussion Papers 13053, Institute of Labor Economics (IZA).
    14. Yu-Cheng Ku & Tsun-Feng Chiang & Sheng-Mao Chang, 2017. "Is what you choose what you want?—outlier detection in choice-based conjoint analysis," Marketing Letters, Springer, vol. 28(1), pages 29-42, March.
    15. YiChun Miriam Liu & Jeff D. Brazell & Greg M. Allenby, 2022. "Non-linear pricing effects in conjoint analysis," Quantitative Marketing and Economics (QME), Springer, vol. 20(4), pages 397-430, December.
    16. Olivier Toubia & Duncan I. Simester & John R. Hauser & Ely Dahan, 2003. "Fast Polyhedral Adaptive Conjoint Estimation," Marketing Science, INFORMS, vol. 22(3), pages 273-303.
    17. Paul E. Green & Abba M. Krieger & Yoram Wind, 2001. "Thirty Years of Conjoint Analysis: Reflections and Prospects," Interfaces, INFORMS, vol. 31(3_supplem), pages 56-73, June.
    18. Davies, Antony & Cline, Thomas W., 2005. "A consumer behavior approach to modeling monopolistic competition," Journal of Economic Psychology, Elsevier, vol. 26(6), pages 797-826, December.
    19. Robert Steiger & Eva Posch & Gottfried Tappeiner & Janette Walde, 2020. "Effects of climate change on tourism demand considering individual seasonal preferences," Working Papers 2020-08, Faculty of Economics and Statistics, University of Innsbruck.
    20. Fabio Galeotti & Maria Montero & Anders Poulsen, 2022. "The Attraction and Compromise Effects in Bargaining: Experimental Evidence," Management Science, INFORMS, vol. 68(4), pages 2987-3007, April.
    21. Li, Feng & Du, Timon C. & Wei, Ying, 2020. "Enhancing supply chain decisions with consumers’ behavioral factors: An illustration of decoy effect," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 144(C).

    More about this item

    Keywords

    Brand-choice decision; Willingness to pay; internal reference price; Consumer heterogeneity; Hierarchical Bayes;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:iik:wpaper:215. 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: Sudheesh Kumar (email available below). General contact details of provider: https://edirc.repec.org/data/iikmmin.html .

    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.