We study the impact of price expectations on converting
consumers’ planned purchases into actual purchases in a store
and investigate when and how the effect of one type of price
expectation dominates the effect of another. This is the first
marketing study to disentangle the two effects. The major
reason for the absence of such studies is the identification
problem. Since price expectations are unobservable and both
explanations can lead to the same observable outcomes, as the
above.To overcome this data problem, we designed a
laboratory experiment where participants shop at an online
store under a realistic environment, in which they make actual
purchases by spending real money. This experiment enables
us to collect detailed information. Specifically, participants
first report what product items they plan to purchase and
how much they expect to pay for those items in the store,
before they are exposed to actual prices (we label this as
PRIOR). After the shopping process, they report again how
much they expect to pay for those planned purchase items if
they were to buy them later (we label this as POST). By
randomly assigning participating consumers into different
manipulated pricing conditions, the online experiment allows
us to study how price changes inside the store affect the
updating process of consumer price expectations and as a
result how they impact purchase decisions. Hence, this approach
is superior to the method of intercepting consumers in
real stores.
We study the impact of price expectations on convertingconsumers’ planned purchases into actual purchases in a storeand investigate when and how the effect of one type of priceexpectation dominates the effect of another. This is the firstmarketing study to disentangle the two effects. The majorreason for the absence of such studies is the identificationproblem. Since price expectations are unobservable and bothexplanations can lead to the same observable outcomes, as theabove.To overcome this data problem, we designed alaboratory experiment where participants shop at an onlinestore under a realistic environment, in which they make actualpurchases by spending real money. This experiment enablesus to collect detailed information. Specifically, participantsfirst report what product items they plan to purchase andhow much they expect to pay for those items in the store,before they are exposed to actual prices (we label this asPRIOR). After the shopping process, they report again howmuch they expect to pay for those planned purchase items ifthey were to buy them later (we label this as POST). Byrandomly assigning participating consumers into differentmanipulated pricing conditions, the online experiment allowsus to study how price changes inside the store affect theupdating process of consumer price expectations and as aresult how they impact purchase decisions. Hence, this approachis superior to the method of intercepting consumers inreal stores.
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