IDEAS home Printed from https://ideas.repec.org/a/eee/joinma/v22y2008i4p2-18.html
   My bibliography  Save this article

The effects of reference prices on bidding behavior in interactive pricing mechanisms

Author

Listed:
  • Wolk, Agnieszka
  • Spann, Martin

Abstract

We examine the effect of reference prices on consumer bidding behavior in interactive pricing mechanisms used in online retailing, e.g., auctions and name-your-own-price. We find significant influences of different reference price concepts on bid values. However, after controlling for internal and external reference prices, sellers only have a moderate ability to affect bid values via the provision of an advertised reference price. An exaggerated advertised reference price increases the bid value among consumers who consider it to be believable. However, its effect is reversed in the presence of an external reference price if consumers consider it unbelievable, decreasing bid values.

Suggested Citation

  • Wolk, Agnieszka & Spann, Martin, 2008. "The effects of reference prices on bidding behavior in interactive pricing mechanisms," Journal of Interactive Marketing, Elsevier, vol. 22(4), pages 2-18.
    • Handle: RePEc:eee:joinma:v:22:y:2008:i:4:p:2-18
    DOI: 10.1002/dir.20118
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S109499680870015X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1002/dir.20118?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. Eric J. Johnson & Wendy W. Moe & Peter S. Fader & Steven Bellman & Gerald L. Lohse, 2004. "On the Depth and Dynamics of Online Search Behavior," Management Science, INFORMS, vol. 50(3), pages 299-308, March.
    2. Mayhew, Glenn E & Winer, Russell S, 1992. "An Empirical Analysis of Internal and External Reference Prices Using Scanner Data," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 19(1), pages 62-70, June.
    3. Monroe, Kent B. & Della Bitta, Albert J. & Downey, Susan L., 1977. "Contextual influences on subjective price perceptions," Journal of Business Research, Elsevier, vol. 5(4), pages 277-291, December.
    4. Briesch, Richard A, et al, 1997. "A Comparative Analysis of Reference Price Models," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 24(2), pages 202-214, September.
    5. Lichtenstein, Donald R & Bearden, William O, 1989. "Contextual Influences on Perceptions of Merchant-Supplied Reference Prices," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 16(1), pages 55-66, June.
    6. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    7. Grewal, Dhruv & Marmorstein, Howard & Sharma, Arun, 1996. "Communicating Price Information through Semantic Cues: The Moderating Effects of Situation and Discount Size," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 23(2), pages 148-155, September.
    8. Erik Brynjolfsson & Michael D. Smith, 2000. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Management Science, INFORMS, vol. 46(4), pages 563-585, April.
    9. Franziska Voelckner, 2006. "An empirical comparison of methods for measuring consumers’ willingness to pay," Marketing Letters, Springer, vol. 17(2), pages 137-149, April.
    10. Utpal M. Dholakia & Itamar Simonson, 2005. "The Effect of Explicit Reference Points on Consumer Choice and Online Bidding Behavior," Marketing Science, INFORMS, vol. 24(2), pages 206-217, October.
    11. Krishnamurthi, Lakshman & Mazumdar, Tridib & Raj, S P, 1992. "Asymmetric Response to Price in Consumer Brand Choice and Purchase Quantity Decisions," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 19(3), pages 387-400, December.
    12. Urbany, Joel E & Bearden, William O & Weilbaker, Dan C, 1988. "The Effect of Plausible and Exaggerated Reference Prices on Consumer Perceptions and Price Search," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 15(1), pages 95-110, June.
    13. Biswas, Abhijit, 1992. "The moderating role of brand familiarity in reference price perceptions," Journal of Business Research, Elsevier, vol. 25(3), pages 251-262, November.
    14. Kamins, Michael A & Dreze, Xavier & Folkes, Valerie S, 2004. "Effects of Seller-Supplied Prices on Buyers' Product Evaluations: Reference Prices in an Internet Auction Context," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 30(4), pages 622-628, March.
    15. Sucharita Chandran & Vicki G. Morwitz, 2005. "Effects of Participative Pricing on Consumers' Cognitions and Actions: A Goal Theoretic Perspective," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 32(2), pages 249-259, September.
    16. Urbany, Joel E, 1986. "An Experimental Examination of the Economics of Information," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 13(2), pages 257-271, September.
    17. Lichtenstein, Donald R & Burton, Scot & Karson, Eric J, 1991. "The Effect of Semantic Cues on Consumer Perceptions of Reference Price Ads," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 18(3), pages 380-391, December.
    18. Gurumurthy Kalyanaram & Russell S. Winer, 1995. "Empirical Generalizations from Reference Price Research," Marketing Science, INFORMS, vol. 14(3_supplem), pages 161-169.
    19. Bruce G. S. Hardie & Eric J. Johnson & Peter S. Fader, 1993. "Modeling Loss Aversion and Reference Dependence Effects on Brand Choice," Marketing Science, INFORMS, vol. 12(4), pages 378-394.
    20. Winer, Russell S, 1986. "A Reference Price Model of Brand Choice for Frequently Purchased Products," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 13(2), pages 250-256, September.
    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. Scott Fay & Robert Zeithammer, 2017. "Bidding for Bidders? How the Format for Soliciting Supplier Participation in NYOP Auctions Impacts Channel Profit," Management Science, INFORMS, vol. 63(12), pages 4324-4344, December.
    2. Krämer, Florentin & Schmidt, Klaus M. & Spann, Martin & Stich, Lucas, 2017. "Delegating pricing power to customers: Pay What You Want or Name Your Own Price?," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 125-140.
    3. Wedad Elmaghraby & Anandasivam Gopal & Ali Pilehvar, 2012. "Reference Prices and Bidder Heterogeneity in Secondary Market Online B2B Auctions," Working Papers 12-06, NET Institute, revised Sep 2012.
    4. Furnham, Adrian & Boo, Hua Chu, 2011. "A literature review of the anchoring effect," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(1), pages 35-42, February.
    5. Ali Pilehvar & Wedad J. Elmaghraby & Anandasivam Gopal, 2017. "Market Information and Bidder Heterogeneity in Secondary Market Online B2B Auctions," Management Science, INFORMS, vol. 63(5), pages 1493-1518, May.
    6. Han, Jidong & Popkowski Leszczyc, Peter T.L. & Zhang, Zelin, 2021. "Empirical Analyses of Nonlinear Effects of Reserve Prices on Ending Prices in Online Auctions," Journal of Interactive Marketing, Elsevier, vol. 54(C), pages 86-102.
    7. Tanya O’Garra & Matthew R Sisco, 2020. "The effect of anchors and social information on behaviour," PLOS ONE, Public Library of Science, vol. 15(4), pages 1-19, April.
    8. Ivanova-Stenzel, Radosveta & Seres, Gyula, 2021. "Are strategies anchored?," European Economic Review, Elsevier, vol. 135(C).
    9. Verhaert, Griet Alice & Van den Poel, Dirk, 2011. "Improving Campaign Success Rate by Tailoring Donation Requests along the Donor Lifecycle," Journal of Interactive Marketing, Elsevier, vol. 25(1), pages 51-63.
    10. Weisstein, Fei L. & Kukar-Kinney, Monika & Monroe, Kent B., 2016. "Determinants of consumers' response to pay-what-you-want pricing strategy on the Internet," Journal of Business Research, Elsevier, vol. 69(10), pages 4313-4320.
    11. Ahmetoglu, Gorkan & Furnham, Adrian & Fagan, Patrick, 2014. "Pricing practices: A critical review of their effects on consumer perceptions and behaviour," Journal of Retailing and Consumer Services, Elsevier, vol. 21(5), pages 696-707.
    12. Kalyanaram, Gurumurthy & Winer, Russell S., 2022. "Behavioral response to price: Data-based insights and future research for retailing," Journal of Retailing, Elsevier, vol. 98(1), pages 46-70.
    13. Ivanova-Stenzel, Radosveta & Seres, Gyula, 2022. "Anchored strategic reasoning," Economics Letters, Elsevier, vol. 212(C).
    14. Narangajavana, Yeamduan & Garrigos-Simon, Fernando J. & García, Javier Sanchez & Forgas-Coll, Santiago, 2014. "Prices, prices and prices: A study in the airline sector," Tourism Management, Elsevier, vol. 41(C), pages 28-42.
    15. Bernhardt, Martin & Spann, Martin, 2010. "An Empirical Analysis of Bidding Fees in Name-your-own-price Auctions," Journal of Interactive Marketing, Elsevier, vol. 24(4), pages 283-296.
    16. 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.
    17. Spann, Martin & Häubl, Gerald & Skiera, Bernd & Bernhardt, Martin, 2012. "Bid-Elicitation Interfaces and Bidding Behavior in Retail Interactive Pricing," Journal of Retailing, Elsevier, vol. 88(1), pages 131-144.
    18. Shi, Lijia & Gao, Zhifeng & Chen, Xuqi, 2014. "The cross-price effect on willingness-to-pay estimates in open-ended contingent valuation," Food Policy, Elsevier, vol. 46(C), pages 13-21.
    19. Di Domenico, Giandomenico & Premazzi, Katia & Cugini, Antonella, 2022. "“I will pay you more, as long as you are transparent!”: An investigation of the pick-your-price participative pricing mechanism," Journal of Business Research, Elsevier, vol. 147(C), pages 403-419.
    20. Chen, Yahong & Li, Jinlin & Huang, He & Ran, Lun & Hu, Yusheng, 2017. "Encouraging information sharing to boost the name-your-own-price auction," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 479(C), pages 108-117.

    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. 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.
    2. 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.
    3. Chandrashekaran, Rajesh & Grewal, Dhruv, 2006. "Anchoring effects of advertised reference price and sale price: The moderating role of saving presentation format," Journal of Business Research, Elsevier, vol. 59(10-11), pages 1063-1071, October.
    4. Sojin Jung & Hyeon Jeong Cho & Byoungho Ellie Jin, 2020. "Does effective cost transparency increase price fairness? An analysis of apparel brand strategies," Journal of Brand Management, Palgrave Macmillan, vol. 27(5), pages 495-507, September.
    5. Hsin‐Hui Lin & Pin‐Han Chen & Chih‐Lun Wu, 2023. "Exploring the price anchoring effect in mobile commerce: An experimental study," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1601-1623, April.
    6. van Oest, Rutger, 2013. "Why are Consumers Less Loss Averse in Internal than External Reference Prices?," Journal of Retailing, Elsevier, vol. 89(1), pages 62-71.
    7. Sojin Jung & Hyeon Jeong Cho & Byoungho Ellie Jin, 0. "Does effective cost transparency increase price fairness? An analysis of apparel brand strategies," Journal of Brand Management, Palgrave Macmillan, vol. 0, pages 1-13.
    8. Bambauer-Sachse, Silke & Massera, Laura, 2015. "Interaction effects of different price claims and contextual factors on consumers' reference price adaptation after exposure to a price promotion," Journal of Retailing and Consumer Services, Elsevier, vol. 27(C), pages 63-73.
    9. Popkowski Leszczyc, Peter T.L. & Qiu, Chun & He, Yongfu, 2009. "Empirical Testing of the Reference-Price Effect of Buy-Now Prices in Internet Auctions," Journal of Retailing, Elsevier, vol. 85(2), pages 211-221.
    10. Priya Jha-Dang, 2006. "A Review of Psychological Research on Consumer Promotions and a New Perspective Based on Mental Accounting," Vision, , vol. 10(3), pages 35-43, July.
    11. Yasemin Boztug & Lutz Hildebrandt, 2005. "An empirical test of theories of price valuation using a semiparametric approach, reference prices, and accounting for heterogeneity," SFB 649 Discussion Papers SFB649DP2005-057, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    12. Liu, Hsin-Hsien & Chou, Hsuan-Yi, 2015. "The effects of promotional frames of sales packages on perceived price increases and repurchase intentions," International Journal of Research in Marketing, Elsevier, vol. 32(1), pages 23-33.
    13. Kopalle, Praveen K. & Kannan, P.K. & Boldt, Lin Bao & Arora, Neeraj, 2012. "The impact of household level heterogeneity in reference price effects on optimal retailer pricing policies," Journal of Retailing, Elsevier, vol. 88(1), pages 102-114.
    14. Dmitri Kuksov & Kangkang Wang, 2014. "The Bright Side of Loss Aversion in Dynamic and Competitive Markets," Marketing Science, INFORMS, vol. 33(5), pages 693-711, September.
    15. Bearden, William O. & Carlson, Jay P. & Hardesty, David M., 2003. "Using invoice price information to frame advertised offers," Journal of Business Research, Elsevier, vol. 56(5), pages 355-366, May.
    16. Jaikumar, Saravana & Sahay, Arvind, 2016. "Effect of Overlapping Price Ranges on Price Perception: Revisiting the Range Theory of Price Perception," IIMA Working Papers WP2016-02-02, Indian Institute of Management Ahmedabad, Research and Publication Department.
    17. De Bruyn, Arnaud & Prokopec, Sonja, 2017. "Assimilation-contrast theory in action: Operationalization and managerial impact in a fundraising context," International Journal of Research in Marketing, Elsevier, vol. 34(2), pages 367-381.
    18. Park, Joo Heon & MacLachlan, Douglas L. & Love, Edwin, 2011. "New product pricing strategy under customer asymmetric anchoring," International Journal of Research in Marketing, Elsevier, vol. 28(4), pages 309-318.
    19. Neumann, Nico & Böckenholt, Ulf, 2014. "A Meta-analysis of Loss Aversion in Product Choice," Journal of Retailing, Elsevier, vol. 90(2), pages 182-197.
    20. David R. Bell & James M. Lattin, 2000. "Looking for Loss Aversion in Scanner Panel Data: The Confounding Effect of Price Response Heterogeneity," Marketing Science, INFORMS, vol. 19(2), pages 185-200, May.

    More about this item

    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:eee:joinma:v:22:y:2008:i:4:p:2-18. 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: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-interactive-marketing/ .

    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.