Subjective Value of Prices
(A2024-119426)

AUTHORS

Priya Raghubir, New York University; Vicki Morwitz, Columbia University ; Gilles Laurent, ESSEC Business School; Minah Jung, New York University

ABSTRACT

The Special Session’s objectives are to bring together researchers interested in the psychology of pricing, and share findings on their recent work in the area. The joint theme is around how consumers attend, evaluate, and react to requests to pay an amount. The primary contribution of this special session will be to identify similarities and differences across different pricing contexts (e.g., voluntary vs. fixed), towards building a more comprehensive understanding of how consumers process payment requests. In the first paper “The Fees Paradox,” Maren Hoff & Vicki Morwitz of Columbia University, show that consumers mispredict how much they like optional fees. While they prefer optional fees when comparing different pricing structures (all-inclusive, mandatory fees), they dislike optional fees when having to pay for them. This is because they mispredict the pain of payment that comes with the freedom of choice. In the second paper “Pay or Donate? How Language Shapes Generosity” Maria Leonor Neto, Minah H. Jung, & Tulin Erdem of NYU examine the effect of framing. In collaboration with a nonprofit serving 35M educators and students, they tested how framing contributions as pay-what-you-want vs. donate-what-you-want influenced donations. In two large-scale field experiments (N=791,014), framing the contribution as a payment substantially increased the contribution rate. However, contradicting existing literature, conditional on contributing, the average contribution in the two treatments did not differ. In the third paper, “Nothing Matters”: A “0%” Option Increases Consumers’ Voluntary Payments” Shirley Bluvstein of Yeshiva University & Priya Raghubir of NYU, reports results of field and lab experiments using digital tip collection systems. They show that replacing the default opt-out “No Tip” with 0%, nudges people to opt-in to tipping and a non-zero option with 0% when a “No Tip” is present leads to higher tips. The effect is mediated by image concerns. In the fourth paper, “How Does the Visual Arrangement of Prices Influence How They Are Compared?” Marc Vanheule of HEC, and Madhav Arora & Gilles Laurent of ESSEC build on recent research on how consumer read prices (Laurent & Vanheule, JCR, 2023) which debunked the theory that people read prices from left to right, ignoring cents in a price. They analyze with eye-tracking how consumers compare prices displayed in a horizontal (left-right) or vertical (top-bottom) arrangement. Compared to vertical comparisons, horizontal comparisons require more effort, measured by number of fixations and saccades, which affects the evaluation of price differences. The papers present counterintuitive findings. For example, Hoff & Morwitz counter-intuitively demonstrate that while consumers evaluate that they like an option to pay an add-on fee, they actually prefer the integrated amount (including the add-ons). Bluvstein & Raghubir show that adding a “0%” option to a tip request, increases, rather than decreases tip amounts. All papers are at an advanced level and all researchers who have agreed to present are well-known in the field of behavioral pricing. The authors come from different academic institutions (Columbia, NYU, Yeshiva, ESSEC & HEC), and include students (Hoff, Neto, & Arora), along with senior researchers who have worked for decades in the domain of pricing. The papers use field experiments (Neto et al.), to lab experiments (e.g., Hoff & Morwitz), both (Bluvstein & Raghubir), and eye-tracking (Vanheule et al.).