Anchoring Effects on Consumers' Willingness-to-Pay and Willingness-to-Accept
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.
|Date of creation:||Feb 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (650) 723-2146
Web page: http://gsbapps.stanford.edu/researchpapers/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard H. Thaler, 2008.
"Mental Accounting and Consumer Choice,"
INFORMS, vol. 27(1), pages 15-25, 01-02.
- 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.
- 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.
- Donald Green & Karen Jacowitz & Daniel Kahneman & Daniel McFadden, 1995. "Referendum Contingent Valuation, Anchoring, and Willingness to Pay for Public Goods," Working Papers _010, University of California at Berkeley, Econometrics Laboratory Software Archive.
- 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.
- 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.
- 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.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:ecl:stabus:1787. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.