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"Reverse Pricing and Online Price Elicitation Strategies in Consumer Choice"

Publication Title: Reverse Pricing and Online Price Elicitation Strategies in Consumer Choice
Author(s): Alexander Chernev

Year: 2003
Published in: Journal of Consumer Psychology

Topic of the Publication: - Information Goods

Abstract:
This research examines consumers' willingness to pay in an online environment. Specifically, I compare two price-elicitation strategies: price generation (i.e., "name your price") and price selection (i.e., "select your price"). Contrary to the common assumption that naming a price will be preferred by consumers because it offers the most flexibility in articulating one's willingness to pay, this research demonstrates that consumers often prefer to select rather than to generate price. In a series of three experiments, I show that the potential unfavorable effects of the price-generation task are associated with the absence of a readily available reference price range. I further demonstrate that the reference price range also has to be externally provided and that internally generated reference prices can as well eliminate the potential negative effect of the price generation task and strengthen consumer preferences. These findings support the proposition advanced in this research that a pre-choice articulation of reference prices can simplify consumer choice by imposing a structure consistent with the nature of the decision task.
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