A multistage process model is proposed that predicts past prices are used to form a reference price (stage 1), the reference price determines perceived expensiveness of the current price (stage 2), and the perceived expensiveness mediates the effects of past prices on demand (stage 3). This process model is tested by measuring the effect of past prices on perceived expensiveness and actual demand in a simulated shopping experiment. The robustness of the model is studied using several price histories and controlling for alternative processes by which past prices might influence demand. Results show that the influence of price history on current demand is mediated through perceived expensiveness as the model predicts; higher past prices lead to lower perceived expensiveness of the current price and this lower perceived expensiveness leads to higher demand.
No takes yet. Share an insight, caveat, or question.
Slonim et al. (1999) studied this question.
Synapse has enriched 5 closely related papers on similar clinical questions. Consider them for comparative context: