Inference Not Reference: The Price Image Heuristic as an Alternative to Reference Price Theories

58 Pages Posted: 18 Feb 2016

See all articles by Ryan Hamilton

Ryan Hamilton

Emory University

Oleg Urminsky

University of Chicago - Booth School of Business

Date Written: January 26, 2013

Abstract

Reference price theories have dominated research into how consumers evaluate prices and make price-based choices. Given the widespread acceptance of reference price theories, it is notable that so little consideration has been given to what happens when the central assumption of these theories is violated: how do consumers evaluate prices when they do not have stable, well-defined reference prices? The authors propose an alternative to reference price theories, in which consumers instead use a general cue, specifically, a retailer’s price image, or overall reputation for charging high or low prices, as a top-down inferential heuristic. This alternative account predicts a pattern of price perceptions, price estimates, and choices that cannot be accounted for using prevailing reference price theories. In each of the domains, reference price theories either predict no differences based on retailer price images or predict the opposite of the reported findings. These predictions are tested against those of prevailing reference price accounts in a series of nine empirical studies that offer converging evidence in support of the proposed theory.

Suggested Citation

Hamilton, Ryan and Urminsky, Oleg, Inference Not Reference: The Price Image Heuristic as an Alternative to Reference Price Theories (January 26, 2013). Available at SSRN: https://ssrn.com/abstract=2733324 or http://dx.doi.org/10.2139/ssrn.2733324

Ryan Hamilton

Emory University ( email )

201 Dowman Drive
Atlanta, GA 30322
United States

Oleg Urminsky (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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