The Effect of Identity Conflict on Price Sensitivity

Social identity has been identified as an important driver of consumer decision making (Reed et al. 2012). Although existing literature has extensively examined the effect of single identity on consumer decisions, it is largely unclear how multiple identities that are simultaneously salient might affect consumer behavior (Reed et al. 2012). This is surprising given people do hold multiple identities (Ramarajan 2014) and it has long been recognized by prominent scholars (James 1890). Thus, the current research intends to examine how multiple identities influence price sensitivity. Price sensitivity refers to the extent to which consumers respond to price changes (Wakefield and Inman 2003). Although previous research has focused on examining how companies can frame price increase differently to mitigate consumers’ price sensitivity (Campbell 2007; Chen et al. 2012), more recent research starts to focus on the influences of consumer characteristics to manage efforts in price increases (Gao, Zhang, and Mittal 2017). From consumers’ perspective, price can be viewed as gain of quality and sacrifice of monetary resources (Dodds, Monroe, and Grewal 1991). Building on this, Gao et al. (2017) find that when facing price increases where quality is unchanged, consumers will focus on the sacrifice dimension of price and conditions facilitate the activated sacrifice mindset -- consumers’ readiness and willingness to give up valuable resources -- would reduce price sensitivity, as higher level of willingness to sacrifice makes price increases more acceptable.