Abstract

The reference price, viewed as a standard against which the purchase price of a product is judged (Monroe 1973), is one of the most studied constructs in research on strategic pricing decisions. Many authors have stressed the importance of contextual effects on reference price formation (Rajendran and Tellis 1994, Mazumdar et al. 2005). The main objective of the current work is therefore to examine the effect of contextual and temporal influences on consumers’ reference price formation during the buying process, using a simulated experiment. We developed a tool called SSPD as a way to measure contextual and temporal influences on reference price formation. The theoretical assumptions proposed here are tested through an ad-hoc computer-simulated experimental context that allows considerable control and new measurement possibilities.

Key words: Reference price, price perception, dynamic analysis, virtual environment.