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Free indulgences: Enhanced zero-price effect for hedonic options

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  • Hossain, Mehdi T.
  • Saini, Ritesh

Abstract

We find that the relative preference of hedonic products is disproportionately enhanced when they are offered at a free price. This “free price bounce” is more subdued for utilitarian products. This is surprising because rational choice theory posits that relative preference amidst two options – say a hedonic and a utilitarian product – remains intact as long as the price difference between them is constant. We propose and demonstrate that this axiom is violated when a hedonic product is offered for free.

Suggested Citation

  • Hossain, Mehdi T. & Saini, Ritesh, 2015. "Free indulgences: Enhanced zero-price effect for hedonic options," International Journal of Research in Marketing, Elsevier, vol. 32(4), pages 457-460.
    • Handle: RePEc:eee:ijrema:v:32:y:2015:i:4:p:457-460
    DOI: 10.1016/j.ijresmar.2015.10.001
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    References listed on IDEAS

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    1. 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.
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    5. Simona Botti & Ann L. McGill, 2011. "The Locus of Choice: Personal Causality and Satisfaction with Hedonic and Utilitarian Decisions," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 37(6), pages 1065-1078.
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    Cited by:

    1. Rudy Douven & Ron van der Heijden & Thomas McGuire & Frederik T. Schut, 2017. "Premium Levels and Demand Response in Health Insurance: Relative Thinking and Zero-Price Effects," NBER Working Papers 23846, National Bureau of Economic Research, Inc.
    2. Toshiaki Iizuka & Hitoshi Shigeoka, 2018. "Free for Children? Patient Cost-sharing and Healthcare Utilization," NBER Working Papers 25306, National Bureau of Economic Research, Inc.
    3. Rudy Douven & Ron van der Heijden & Thomas McGuire & Erik Schut, 2017. "Premium levels and demand response in health insurance: relative thinking and zero-price effects," CPB Discussion Paper 366, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Douven, Rudy & van der Heijden, Ron & McGuire, Thomas & Schut, Frederik, 2020. "Premium levels and demand response in health insurance: relative thinking and zero-price effects," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 903-923.
    5. Rudy Douven & Ron van der Heijden & Thomas McGuire & Erik Schut, 2017. "Premium levels and demand response in health insurance: relative thinking and zero-price effects," CPB Discussion Paper 366.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Alnawas, Ibrahim & Al Khateeb, Amr & El Hedhli, Kamel, 2023. "The effects of app-related factors on app stickiness: The role of cognitive and emotional app relationship quality," Journal of Retailing and Consumer Services, Elsevier, vol. 75(C).
    7. Xiaomeng Fan & Fengyan Cindy Cai & Galen V. Bodenhausen, 2022. "The boomerang effect of zero pricing: when and why a zero price is less effective than a low price for enhancing consumer demand," Journal of the Academy of Marketing Science, Springer, vol. 50(3), pages 521-537, May.

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