Price Contrasts in the Wild

43 Pages Posted: 29 Nov 2023 Last revised: 6 Feb 2024

See all articles by Ariel Fridman

Ariel Fridman

ESADE Business School

On Amir

University of California, San Diego (UCSD) - Rady School of Management

Karsten Hansen

University of California, San Diego (UCSD)

Date Written: November 8, 2023

Abstract

Existing literature offers conflicting hypotheses regarding the effects of encountering extremely high prices. While one possibility is that extreme-priced alternatives are beneficial to include, since they make more moderately-priced alternatives more attractive and improve the brand quality image, evidence from price contrasts in a real-world online platform reveal the opposite – a reduction in the probability of a purchase. This effect was stronger in settings where customers experienced heightened uncertainty about the alternatives, as well as among first-time buyers. Astonishingly, these effects persisted for years after encountering an extreme price. We propose that extreme prices influence customers by undermining their overall trust in the platform, thereby turning them away and reducing the likelihood they make any purchase. These findings elucidate a novel context effect with important practical implications for marketers, choice architects, and user interface designers.

Keywords: Extreme Prices, Contrast Effect, Uncertainty, Field Data, Context Effects

Suggested Citation

Fridman, Ariel and Amir, On and Hansen, Karsten, Price Contrasts in the Wild (November 8, 2023). Available at SSRN: https://ssrn.com/abstract=4627020 or http://dx.doi.org/10.2139/ssrn.4627020

Ariel Fridman (Contact Author)

ESADE Business School ( email )

Av. de Pedralbes, 60-62
Barcelona, 08034
Spain

On Amir

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States
858-534-2023 (Phone)
858-534-0745 (Fax)

HOME PAGE: http://management.ucsd.edu/faculty/directory/amir/

Karsten Hansen

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
34
Abstract Views
162
PlumX Metrics