Non-Normative Influence of Self-Decided Prices on Product-Related Inferences

Price is a key factor in consumer decision making (Adaval and Monroe, 2002; De Langhe et al., 2014). From a purely economic perspective, consumers should be willing to buy a product if the value that they expect from the product is higher than the product price – implying that consumers should determine the value of a product independent of the price. However, ample research shows that consumers often use the marketer-provided prices to make product inferences (Zeithaml, 1988; Parasuraman et al., 1988; Brucks et al., 2000). This is rational assuming that marketers decide product-prices based on the market dynamics of supply and demand, which would lead a product price to be closely aligned to its inherent value (i.e. quality and usefulness). While, inferring product value from marketer-provided prices may be rational, this is not the case when consumers themselves generate or decide on product prices as in pay-as-you-wish/pay-what-you-want pricing schemes (Kim et al., 2009), auctions (Greenleaf, 2004) and price negotiations (Srivastava et al., 2000). Normatively, product value should influence self-decided prices rather than the reverse. Still, we argue that consumers may infer value from the price they decide to pay; this may lead to biased inferences when selfdecided prices are affected by irrelevant contextual factors. We argue that due to sheer habit of inferring value from marketer-provided prices (Plassmann et al., 2007, 2008; Rao and Monroe, 1989; Scitovszky, 1944), consumers will over apply the price-quality heuristic in the case of self-decided prices too. That is, higher the self-decided price, the more favorable would be the inferred product value.