The Impact of Advertised Reference Price on the Attraction Effect: A Constructive Choice Perspective

Alessandro Colucci

Student thesis: Master thesis

Abstract

This thesis seeks to investigate how advertised reference price (ARP) display influences the strength of the attraction effect. The attraction effect is a phenomenon whereby the likelihood of choosing a target alternative over its competitor is greater if the target is presented alongside a third option that is clearly inferior to it (the decoy), compared to when the target is presented along with the competitor only. Extant research in the field has suggested that the attraction effect is amplified when the dominance relation of the target over the decoy is readily apparent, and is minimized when the information presented is perceived as relevant and aids decision making. An ARP is the retailer-provided price against which consumers compare the actual sale price of a product. The relationship between ARP and the attraction effect is, in theory, paradoxical, since the ARP can at the same time increase the intensity of the attraction effect, by making the dominance relation of the target over the decoy more apparent, and decrease it, by presenting information that facilitates decision making. A survey experiment was administered to 326 participants, randomly allocated to an experimental and a control condition. Participants were asked to choose their preferred options in eight asymmetrically dominated choice sets, which mimicked realistic purchase situations in a variety of low-involvement product categories. The results suggested that ARP display is associated with a stronger attraction effect. The effect is more robust when the savings information is presented in an absolute ($-off) format than when it is presented in a relative (%-off) format. However, the findings showed that the association between advertised reference price display and attraction effect is not as robust as anticipated. It is likely that the reason underlying this weak association is attributable to an increase in perceived task complexity when ARP information is displayed. Further research is needed to investigate the link between perceived task complexity and attraction effect, as well as to explore the potential incidence of other moderating factors that may have caused a considerable variability across the tested choice sets.

EducationsMSc in Brand and Communications Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2019
Number of pages137