Joydeep Srivastava

A Consumer Perspective on Price-Matching Refund Policies: Effect on Price Perceptions and Search Behavior

Although price-matching refund policies are common in many retail environments, the impact of such policies on consumers has largely been ignored. This article reports the results of three studies that examine price-matching policies from a consumer perspective. Study 1 shows that consumers perceive price-matching policies as signals of low store prices and that the presence of a refund increases the likelihood of discontinuing price search. Contrary to the predictions based on signaling theory in information economics, studies 2 and 3 show that when search costs are low, the number of stores searched increases in the presence versus absence of a price-matching policy. When search costs are high, consumers appear to accept the price-matching signal at face value and search less in the presence of a refund. The article concludes by discussing the theoretical implications of the findings and suggesting directions for future research.

An Experimental and Theoretical Analysis of Price-Matching Refund Policies

Price-matching refund policies, or offers by firms to match competitors prices, are common in both consumer and industrial marketing. Much of the previous theoretical work in economics suggests that price-matching refunds are associated with higher prices. In contrast, the trade press postulates that price-matching policies are associated with lower prices. Given these inconsistent views regarding price-matching policies, the authors experimentally examine how consumers view and interpret such policies and then develop a model that incorporates these consumer interpretations as well as asymmetries across stores. In the model, the asymmetry across stores is the key to deriving the conditions under which a signaling equilibrium exists in the presence of price-matching policies. The critical point is that the competition-reducing and price discrimination effects, which seem to form the basis of most of the previous theoretical literature, can be counteracted by the presence of differentiated firms and uninformed consumers. The model suggests that under some conditions, price-matching policies can lead to more intense price competition. Furthermore, all firms will not find it profitable to offer refunds, and consistent with consumer expectations, the firms with lower prices will offer refunds.

Monopoly money: The effect of payment coupling and form on spending behavior.

This article examines consumer spending as a function of payment mode both when the modes differ in terms of payment coupling (association between purchase decision and actual parting of money) and physical form as well as when the modes differ only in terms of form. Study 1 demonstrates that consumers are willing to spend more when a credit card logo is present versus absent. Study 2 shows that the credit card effect can be attenuated when people estimate their expenses using a decomposition strategy (vs. a holistic one). Noting that credit card and cash payments differ in terms of payment coupling and form, Studies 3 and 4 examine consumer spending when the payment mode differs only in physical form. Study 3 demonstrates that consumers spend more when they are spending scrip (a form of stored value certificate) versus cash of the same face value. Study 4 shows that the difference in spending across payment modes (cash and gift certificates) is attenuated by altering the salience of parting with money through contextual manipulations of the differences between cash and gift certificates.

Partitioned Presentation of Multicomponent Bundle Prices: Evaluation, Choice and Underlying Processing Effects

Firms may choose to present the price of a multicomponent product bundle in partitioned (separate price for each mandatory component) or consolidated (single, equivalent price) fashion. In this article, we report on 2 experiments that examined the effects of such presentations on evaluations and choices as well as the underlying processing effects. In Experiment 1, consistent with a mental accounting analysis, a multicomponent product bundle was evaluated more favorably and chosen more often when its components were presented with partitioned (vs. consolidated) prices. The effects were, however, moderated by the component partitioned. In particular, it appeared that partitioning prices altered attention paid to the components partitioned and related product features. In Experiment 2, we found that different splits of the bundle price influenced evaluations and choices depending on how the focal product price related to that of a comparison option. These price-split effects were also moderated by the component partitioned, suggesting attention effects similar to Experiment 1. The findings show that although the effects of price partitioning were consistent with mental accounting principles, they were moderated by information processing effects related to the partitioned component.

Channel Negotiations with Information Asymmetries: Contingent Influences of Communication and Trustworthiness Reputations

This article reports three experiments that examine how communication types (informational, relational, and coercive messages) and mutual trustworthiness reputations influence sequential bargaining between an uncertain manufacturer and an informed distributor in a marketing channel. In Experiment 1, bargainers use informational and relational messages to establish a positive social tenor in the interaction. Compared with when bargainers communicate only through offers and counteroffers, explicit communication produces quicker and more efficient agreements. The effects are stronger when manufacturer uncertainty is relatively high. In Experiment 2, mutual reputations of high (versus low) trustworthiness also produce quicker and more efficient agreements. In both studies, the larger extracted surplus increases manufacturer profits without affecting distributor profits. However, contrary to economic intuition, the gains from communication accrue asymmetrically to the uninformed manufacturer. Experiment 3 shows the effects of communication type are contingent on the prevailing level (high or low) of trustworthiness reputations in the dyad. Compared with no communication, relational messages elicit the most positive (negative) outcomes when trustworthiness reputations are high (low). Informational messages have a smaller but positive impact on bargaining outcomes in both trustworthiness conditions and appear to build trust.

Debiasing Using Decomposition: The Case of Memory-Based Credit Card Expense Estimates

This article develops a conceptual framework to examine how consumers incorporate memory-based and context-based cues in estimating past and future credit card expenses. Focusing on memory-based information, in this framework we suggest that past credit card expenses may be recalled as holistic totals or episodic individual expenses depending on the accessibility of each form of expense. We tested the conceptual framework with 3 studies. Study 1 showed that the recency of past expenses and frequency of credit card usage moderated the extent to which past expenses were used in estimating future expenses. Study 1 also showed that self-awareness of estimation bias affected consumers’ estimates of future expenses. Study 2 showed that a decomposition strategy (unbundling a total into subcategories), which serves to make episodic individual expenses more accessible, was effective in reducing sampling-based bias. Study 3 provided a validity check and showed that decomposition cues reduced estimation errors and affected estimates of future expense. In this article, we demonstrate the manner in which memory-based information is used to make estimates, and we also demonstrate the effectiveness of decomposition as a debiasing technique for past and future estimates.

Effect of response time on perceptions of bargaining outcomes

This research reports three studies that examine how cues which emerge from the bargaining environment, such as the time taken by an opponent to respond to an offer, influence perceptions of bargaining outcomes. Study 1 finds that bargainers were more satisfied with outcomes when an offer was accepted after a delay than when accepted immediately. Study 2 shows that inferences of the level of conflict within the opponent underlie the effect of response time on perceptions of bargaining outcomes. Study 3 shows that the presence of an objective (or diagnostic) referent moderates the influence of response time.

Role of Information Asymmetry and Situational Salience in Reducing Intergroup Bias: The Case of Ultimatum Games

While majority of the literature documents the preponderance of social identity–related biases in favor of in-group members, this research investigates factors that may attenuate the bias. Examining intergroup bias within the realm of information availability and accessibility, this research highlights malleability of judgments and decisions as a function of social identity in both complete and incomplete information situations in the context of ultimatum games. Study 1 replicates the positive bias toward in-group members even in situations where individuals know that the counterpart is behaving unfairly. Study 2 shows that the intergroup bias is attenuated for relatively unfavorable offers in incomplete information situations. However, the intergroup bias is persistent for relatively favorable offers. Study 3 shows that making situational constraints salient also attenuates the intergroup bias for relatively favorable offers. Together, the findings identify conditions, based on information availability and accessibility, under which the intergroup bias can be corrected.

When 2 + 2 Is Not the Same as 1 + 3: Understanding Customer Reactions to Partitioned Prices

Abstract Firms often use a pricing strategy in which they partition the total price of a product and/or service into two or more mandatory components, such as parts and shipping. In this research, we examine how dividing the same total price differently across the components affects customers’ reactions. In a series of studies, we show that customers systematically prefer partitions of the same total price in which the price of low benefit components (e.g., shipping) is lower and the price of high benefit components (e.g., parts) is higher. Thus, for effective pricing, markups on components that consumers believe provide a high degree of benefit should be higher than markups on components that consumers believe provide less benefit

What’s in Your Wallet? Psychophysical Biases in the Estimation of Money

The denomination effect (Raghubir and Srivastava 2009) suggests that individuals are less likely to spend when money is in the form of a single large denomination (e.g., a