Belief revision and other effects of reference prices in retail advertisements



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The concept of reference price, extensively used in retail advertisements, has received considerable research attention over the last fifteen years. Unfortunately, until recently very little attention has been paid to the theoretical aspects of reference prices. This dissertation examines how reference prices in advertisements affect consumers1 perceptions and behavioral intentions. A model of reference price adaptation and use is proposed using assimilation-contrast theory, adaptation level theory, and Thaler's theory of consumer choice. The model facilitates explanation of contradictory findings in previous research. Also, a study is reported which examines the effects of external reference price on price related prior beliefs and consequently on price perceptions and shopping intentions. The mediating roles of contextual variables in the entire process are considered. The results of the study indicate that consumers' price estimates are more susceptible to change when their initial beliefs are weak and when they are exposed to implausible reference prices in advertisements. In addition, the results show that there may not necessarily be a positive relationship between perceived saving and shopping intention. Shop-around saving is identified as a major variable affecting shopping intention. In general, the results of this study help clarify the contradictory nature of the prior findings. Finally, the results demonstrate that reference prices can be potentially harmful to the consumers.



Pricing, Consumer behavior--United States, Motivation research (Marketing)