Image Effects and Rational Inattention in Internet-Based Selling

International Journal of Electronic Commerce, 13(4), Summer 2009, pp. 129-167

38 Pages Posted: 9 Feb 2009 Last revised: 2 Jun 2018

See all articles by Dongwon Lee

Dongwon Lee

Korea University Business School

Robert J. Kauffman

Singapore Management University; Singapore Management University - School of Information Systems

Mark E. Bergen

University of Minnesota - Carlson School of Management

Date Written: January 22, 2009

Abstract

We investigate the extent to which certain price points occur in Internet-based selling, and theorize about what drives the observed regularities and variations. This research explores theories based on consumer perceptions of price and quality images, and rational inattention to price-endings. To accomplish this, we specify and test empirical models for price-endings using over 1.5 million daily observations on multiple product categories sold by ninety of Internet-based retailers that were collected over a two-year period. Our results show that a firm's online reputation and relative price levels have effects on the chosen price-endings with respect to different product categories and 9-ending prices increase consumer purchases. The results support an image theory of store quality and price. We also find that the use of 9-ending prices varies across Internet selling formats in a way that is consistent with differences in the rational attentiveness that these channels engender with the consumers who use them. Finally, this research provides additional impetus for future research on the role of information technology in firm price-setting, and gives new insights for marketers who wish to optimize price-setting decisions in the competitive online environment of Internet retailing.

Keywords: Image effects, Internet-based selling, 9-ending prices, price points, rational inattention, strategic pricing, technology impact

Suggested Citation

Lee, Dongwon and Kauffman, Robert J. and Bergen, Mark E., Image Effects and Rational Inattention in Internet-Based Selling (January 22, 2009). International Journal of Electronic Commerce, 13(4), Summer 2009, pp. 129-167. Available at SSRN: https://ssrn.com/abstract=1339871 or http://dx.doi.org/10.2139/ssrn.1339871

Dongwon Lee (Contact Author)

Korea University Business School ( email )

Anam-Dong, Seongbuk-Gu
Seoul, 136701
Korea, Republic of (South Korea)

HOME PAGE: http://dongwon.info

Robert J. Kauffman

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore
65-6828-929 (Phone)

Singapore Management University - School of Information Systems ( email )

80 Stamford Road
Singapore, 178902
Singapore

Mark E. Bergen

University of Minnesota - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
612-624-1821 (Phone)

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