Can consumers learn price dispersion? Evidence for dispersion spillover across categories
André, Quentin Reinholtz, Nicholas De Langhe, Bart
André, Quentin
Reinholtz, Nicholas
De Langhe, Bart
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Publication Type
Journal article with impact factor
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Supervisor
Publication Year
2022
Journal
Journal of Consumer Research
Book
Publication Volume
48
Publication Issue
5
Publication Begin page
756
Publication End page
774
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Abstract
Price knowledge is a key antecedent of many consumer judgments and decisions. This article examines consumers' ability to form accurate beliefs about the minimum, the maximum, and the overall variability of prices for multiple product categories. Eight experiments provide evidence for a novel phenomenon we call dispersion spillover : Consumers tend to overestimate price dispersion in a category after encountering another category in which prices are more dispersed (vs. equally or less dispersed). Our experiments show that this dispersion spillover is consequential: It influences the likelihood that consumers will search for (and find) better prices and offers, and how much consumers bid in auctions. Finally, we disentangle two cognitive processes that might underlie dispersion spillover. Our results suggest that judgments of dispersion are not only based on specific prices stored in memory and that dispersion spillover does not simply reflect the inappropriate activation of prices from other categories. Instead, it appears that consumers also form "intuitive statistics" of dispersion: Summary representations that encode the dispersion of prices in the environment but that are insufficiently category specific
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Keywords
Consumers, Price Regulation, Shadow Prices, Wage Differentials, Auctions, Behavioral Pricing, Consumer Learning, Intuitive Statistics, Mental Representation, Numerical Cognition, Price Dispersion, Price Knowledge, Price Search, Reference Price