Probabilistic Selling for Vertically Differentiated Products with Salient Thinkers

Marketing Science, Forthcoming

42 Pages Posted: 13 Nov 2018 Last revised: 8 May 2020

See all articles by Quan Zheng

Quan Zheng

School of Management, University of Science and Technology of China

Xiajun Amy Pan

University of Florida - Warrington College of Business Administration

Janice Carrillo

University of Florida - Warrington College of Business Administration

Date Written: October 3, 2018

Abstract

This paper studies probabilistic selling for vertically differentiated products, whereby consumers do not know the exact identity of a product until after making the purchase. An important feature of probabilistic selling overlooked by previous literature is that it changes the product line which often determines consumers’ choice context. Our work discovers the crucial role of context effects taking into account consumers’ salient thinking behavior: consumers focus their limited attention on and hence overweight the salient attribute of a product in their perception, leading to context-dependent preferences. We show that probabilistic selling can improve the seller’s profit with salient thinkers even when this strategy does not emerge with rational consumers. With salient thinking, the probabilistic product enables the seller to transform the consumers’ choice context favorably and direct their attention to quality. Our findings demonstrate the importance of exploiting consumers’ salient thinking behavior and suggest that probabilistic selling, as a context management tool, can be more beneficial than previously shown.

Keywords: probabilistic selling; vertically differentiated products; context effect; salience; decoy; behavioral pricing

Suggested Citation

Zheng, Quan and Pan, Xiajun and Carrillo, Janice, Probabilistic Selling for Vertically Differentiated Products with Salient Thinkers (October 3, 2018). Marketing Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3260315

Quan Zheng (Contact Author)

School of Management, University of Science and Technology of China ( email )

Hefei, Anhui
China

Xiajun Pan

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

Janice Carrillo

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

HOME PAGE: http://warrington.ufl.edu/contact/profile.asp?WEBID=1274

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