Mode of payment and formation of reference prices

Abstract

States that reference price has emerged as a central feature in consumer decisions. The goal of this study was to explore the contribution of mode of payment to the formulation of personal reference prices (what one believes to be a fair price for a product) and reservation prices (the highest price one is willing to pay for a product). Reference prices for the products were significantly influenced by mode of payment (check, cash, credit card). Those in the credit card condition formulated significantly higher reference and reservation prices than when other modes of payment were considered. That credit cards can raise reference prices leads to a better understanding of why consumers spend more with credit cards.

Citation

Monger, J.E. and Feinberg, R.A. (1997), "Mode of payment and formation of reference prices", Pricing Strategy and Practice, Vol. 5 No. 4, pp. 142-147. https://doi.org/10.1108/09684909710184635