Empirical Generalizations from Reference Price Research

Gurumurthy Kalyanaram and Russell S. Winer
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Gurumurthy Kalyanaram: The University of Texas at Dallas
Russell S. Winer: University of California at Berkeley

Marketing Science, 1995, vol. 14, issue 3_supplement, G161-G169

Abstract: Considerable theoretical justification for consumers' use of psychological reference points exists from the research literature. From a managerial perspective, one of the most important applications of this concept is reference price, an internal standard against which observed prices are compared. In this paper, we propose three empirical generalizations that are well-supported in the marketing literature. First, there is ample evidence that consumers use reference prices in making brand choices. Second, the empirical results on reference pricing also support the generalization that consumers rely on past prices as part of the reference price formation process. Third, consistent with other research on loss aversion, consumers have been found to be more sensitive to “losses,” i.e. observed prices higher than reference prices, than “gains.” We also propose topics for further research on reference prices.

Keywords: reference price; brand choice; decision making (search for similar items in EconPapers)
Date: 1995
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