To construct a price judgment, consumers compare a focal price with one or more reference prices. However, reference price operationalizations in the brand choice literature use single-point summary measures that cannot account for several distributional effects. To account for effects beyond the first moment of the reference price distribution, the authors specify price judgments in models of brand choice in accordance with range–frequency theory. The findings indicate that range–frequency price judgments provide a more complete specification of reference price effects and become more important with an increase in the second and third moments of a reference price distribution. The data also indicate that range effects are stronger for coupon users and frequency effects are stronger for consumers exposed to a trend of prices. The results have several implications for choice modeling, pricing theory, and pricing strategy.
BellDavid R., and LattinJames M. (2000), “Looking for Loss Aversion in Scanner Panel Data: The Confounding Effect of Price Response Heterogeneity,”Marketing Science, 19(Spring), 185–200.
2.
BlattbergRobert C., BrieschRichard, and FoxEdward (1995), “How Promotions Work,”Marketing Science, 14(Summer, Part 2 of 2), G122–32.
3.
BrieschRichard A., KrishnamurthiLakshman, MazumdarTridib, and RajSevilimedu P. (1997), “A Compartive Analysis of Reference Price Models,”Journal of Consumer Research, 24(September), 202–214.
4.
FaderPeter S., LattinJames M., and LittleJohn D.C. (1992), “Estimating Nonlinear Parameters in the Multinomial Logit Model,”Marketing Science, 11(Fall), 372–85.
5.
FeldmanJack M., and LynchJohn G. (1988), “Self-Generated Validity and Other Effects of Measurement on Belief, Attitude, Intention, and Behavior,”Journal of Applied Psychology, 73(August), 421–35.
6.
GuadagniPeter M., and LittleJohn D. (1983), “A Logit Model of Brand Choice Calibrated on Scanner Data,”Marketing Science, 2(Summer), 203–238.
7.
GuptaSachin, ChintaguntaPradeep, KaulAnil, and WittinkDick R. (1996), “Do Household Scanner Data Provide Representative Inferences from Brand Choices: A Comparison with Store Data,”Journal of Marketing Research, 33(November), 383–98.
8.
GuptaSunil (1988), “Impact of Sales Promotions on When, What, and How Much to Buy,”Journal of Marketing Research, 25(November), 342–55.
9.
HanSangman, GuptaSunil, and LehmannDonald R. (2001), “Consumer Price Sensitivity and Price Thresholds,”Journal of Retailing, 77(Winter), 435–56.
10.
HardieBruce G.S., JohnsonEric J., and FaderPeter S. (1993), “Modeling Loss Aversion and Reference Dependence Effects on Brand Choice,”Marketing Science, 12(Fall), 378–94.
HensherDavid A., and GreeneWilliam H. (2003), “The Mixed Logit Model: The State of Practice,”Transportation, 30(2), 133–76.
13.
JaniszewskiChris, and LichtensteinDonald R. (1999), “A Range Theory Account of Price Perception,”Journal of Consumer Research, 25(March), 353–68.
14.
JonesEugene (1997), “An Analysis of Consumer Food Shopping Behavior Using Supermarket Scanner Data: Differences by Income and Location,”American Journal of Agricultural Economics, 79(5), 1437–43.
15.
KalwaniManohar U., and YimChi Kin (1992), “Consumer Price and Promotion Expectations: An Experimental Study,”Journal of Marketing Research, 29(February), 90–100.
16.
KalyanaramGurumurthy, and LittleJohn D.C. (1994), “An Empirical Analysis of Latitude of Price Acceptance in Consumer Package Goods,”Journal of Consumer Research, 25(December), 408–418.
17.
KalyanaramGurumurthy, and WinerRussell S. (1995), “Empirical Generalizations for Reference Price Research,”Marketing Science, 14(Summer, Part 2 of 2), G161–69.
18.
LattinJames M., and BucklinRandolph E. (1989), “Reference Effects of Price and Promotion on Brand Choice,”Journal of Marketing Research, 26(August), 299–310.
19.
LichtensteinDonald R., NetemeyerRichard G., and BurtonScot (1991), “Using a Theoretical Perspective to Examine the Psychological Construct of Coupon Proneness,” in Advances in Consumer Research, Vol. 18, HolmanRebecca H., and SolomonMichael R., eds. Provo, UT: Association for Consumer Research, 501–508.
20.
MayhewGlenn E., and WinerRussell S. (1992), “An Empirical Analysis of Internal and External Reference Prices Using Scanner Data,”Journal of Consumer Research, 19(June), 62–70.
21.
MazumdarTridib, and PapatlaPurushottam (2000), “An Investigation of Reference Price Segments,”Journal of Marketing Research, 37(May), 246–58.
22.
MazumdarTridib, RajS.P., and SinhaIndrajit (2005), “Reference Price Research: Review and Propositions,”Journal of Marketing, 69(October), 84–102.
23.
MittalBanwari (1994), “An Integrated Framework for Relating Diverse Consumer Characteristics to Supermarket Coupon Redemption,”Journal of Marketing Research, 31(November), 533–44.
24.
NiedrichRonald W., SharmaSubhash, and WedellDouglas H. (2001), “Reference Price and Price Perceptions: A Comparison of Alternative Models,”Journal of Consumer Research, 28(December) 339–54.
25.
NosofskyRobert M., and ZakiSafa R. (2002), “Exemplar and Prototype Models Revisited: Response Strategies, Selective Attention, and Stimulus Generalization,”Journal of Experimental Psychology: Learning, Memory, and Cognition, 28(5), 924–40.
26.
ParducciAllen (1965), “Category Judgment: A Range-Frequency Model,”Psychological Review, 72(November), 407–418.
27.
ParducciAllen (1995), Happiness, Pleasure, and Judgment: The Contextual Theory and Its Applications.Mahwah, NJ: Lawrence Erlbaum Associates.
28.
ParducciAllen, and WedellDouglas H. (1986), “The Category Effect with Rating Scales: Number of Categories, Number of Stimuli, and Method of Presentation,”Journal of Experimental Psychology: Human Perception and Performance, 12(November), 496–516.
29.
RajendranK.N., and TellisGerard J. (1994), “Contextual and Temporal Components of Reference Price,”Journal of Marketing Research, 58(January), 22–34.
30.
RaoRam C., ArjunjiRamesh V., and MurthiB.P.S. (1995), “Game Theory and Empirical Generalizations Concerning Competitive Promotions,”Marketing Science, 14(Summer, Part 2 of 2), G89–G100.
31.
SchwartzG. (1978), “Estimating the Dimension of a Model,”Annals of Statistics, 6(2), 461–64.
32.
Silva-RissoJorge M., BucklinRandolph E., and MorrisonDonald C (1999), “A Decision Support System for Planning Manufacturers' Sales Promotion Calendars,”Marketing Science, 18(Summer), 274–300.
33.
SinghVishal P., HansenKarsten, and GuptaSachin (2005), “Modeling Preferences for Common Attributes in Multicategory Brand Choice,”Journal of Marketing Research, 42(May), 195–209.
34.
SteenkampJan-Benedict E.M., NijsVincent R., HanssensDominque M., and DekimpeMarnik G. (2005), “Competitive Reactions to Advertising and Promotion Attacks,”Marketing Science, 24(Winter), 25–34.
35.
SunBaohong, NeslinScott A., and SrinivasanKannan (2003), “Measuring the Impact of Promotions on Brand Switching When Consumers Are Forward Looking,”Journal of Marketing Research, 40(November), 389–405.
36.
TrainKenneth, E. (2003), Discrete Choice Methods with Simulation.Cambridge, UK: Cambridge University Press.
37.
WinerRussell, S. (1988), “Behavioral Perspectives on Pricing: Buyers' Subjective Perceptions of Price Revisited,” in Issues in Pricing: Theory and Research, DevinneyTimothy, ed. Lexington, MA: Lexington Books, 35–58.
38.
WinerRussell, S. (1999), “Experimentation in the 21st Century: The Importance of External Validity,”Journal of the Academy of Marketing Science, 27(3), 349–58.
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
