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Anchoring Effects on Consumers' Willingness-to-Pay and Willingness-to-Accept

  • Simonson, Itamar

    (Stanford U)

  • Drolet, Aimee L.

    (U of California, Los Angeles)

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    When purchasing products, consumers often need to decide on the highest price they are willing to pay (WTP) and, when selling products, on the lowest price they are willing to accept (WTA). In this research, we contrast the determinants of WTP and WTA judgments and investigate their susceptibility to influence by arbitrary anchors that are unrelated to the product value. Consistent with our analysis, we demonstrate in a series of studies that purchase, but not selling, prices are influenced by arbitrary anchors (e.g., the last two digits of the person's social security number), even when such anchors are rejected as possible purchase/selling prices. Conversely, selling, but not purchase, prices are influenced by arbitrary anchors relating to the perceived market price of the product. The results also indicate that selling prices become sensitive to arbitrary anchors that are considered as possible prices, if the uncertainty about the value of the product to the consumer is made salient. We discuss the implications of these findings with respect to our understanding of the determinants of consumers' willingness-to-pay and willingness-to-accept, value-based pricing, and the anchoring effect.

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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP1787.pdf
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    Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1787.

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    Date of creation: Feb 2003
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    Handle: RePEc:ecl:stabus:1787
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    1. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
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    3. Lichtenstein, Donald R & Bearden, William O, 1989. " Contextual Influences on Perceptions of Merchant-Supplied Reference Prices," Journal of Consumer Research, University of Chicago Press, vol. 16(1), pages 55-66, June.
    4. Bettman, James R & Luce, Mary Frances & Payne, John W, 1998. " Constructive Consumer Choice Processes," Journal of Consumer Research, University of Chicago Press, vol. 25(3), pages 187-217, December.
    5. Friestad, Marian & Wright, Peter, 1994. " The Persuasion Knowledge Model: How People Cope with Persuasion Attempts," Journal of Consumer Research, University of Chicago Press, vol. 21(1), pages 1-31, June.
    6. 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, University of Chicago Press, vol. 15(1), pages 95-110, June.
    7. Dhar, Ravi & Nowlis, Stephen M, 1999. " The Effect of Time Pressure on Consumer Choice Deferral," Journal of Consumer Research, University of Chicago Press, vol. 25(4), pages 369-84, March.
    8. Green, Donald & Jacowitz, Karen E. & Kahneman, Daniel & McFadden, Daniel, 1998. "Referendum contingent valuation, anchoring, and willingness to pay for public goods," Resource and Energy Economics, Elsevier, vol. 20(2), pages 85-116, June.
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