How social comparison influences reference price formation in a service context |
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| Institution: | 1. University Pompeu Fabra, Department of Economics and Business, Ramon Trias Fargas 25-27, 08005 Barcelona, Spain;2. University of Piemonte Orientale “A. Avogadro”, Department of Economics and Business, Via Perrone 18, 28100 Novara, Italy;1. Leiden University, Steenschuur 25, 2311 ES Leiden, The Netherlands;2. University of West London, St Mary''s Road, Ealing, London W5 5RF, United Kingdom;3. University of Surrey, 388 Stag Hill, Guildford GU2 7XH, United Kingdom;1. Central Queensland University, Australia;2. James Cook University, Australia;1. Said Business School, Oxford University, United Kingdom;2. UC Berkeley, United States;1. Australian School of Business, University of New South Wales, Australia;2. John D. Gray Professor of Marketing, Kellogg School of Management, Northwestern University, United States |
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| Abstract: | What is the influence on reference price when the source of price information is anonymous versus social? This article investigates the formation of reference prices given an observed sequence of past prices in a service context. An experimental study suggests that, considering the same price information, if the source is social (i.e., the prices paid by colleagues), then consumers want to pay less. More specifically, social comparison changes the way individuals weigh information, attributing more importance to the lowest historical prices and to the range in price variations. |
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| Keywords: | Reference price Social comparison Dynamic pricing Prelec weighting function |
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