The effect of reference prices on consumer willingness-to-pay
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The purpose of this research was to provide a better understanding of consumers’ WTP and emotions when using a NYOP method when reference prices were and were not available. Specifically, this study examined 1) whether the availability of reference prices increases consumers’ comfort with using the NYOP method and their confidence with their WTP; 2) whether consumers feel more regret about a negative outcome when reference prices are available; and 3) how reference prices affect consumers’ WTP and whether different reference prices play different influential roles in the online purchase environment. Five specific research questions and five hypotheses were tested in three experiments. The results indicated that the reference prices significantly affected subjects’ WTP. Also, subjects’ comfort with using the NYOP method and regret about a negative outcome were significantly correlated with the availability of reference prices. The current study has implications for consumers as well as for marketers in that references prices serve as an informational tool to help consumers to transfer their preferences or value elicitations into monetary terms. A model regarding consumers’ regret about a negative outcome also was proposed for future research.