TITLE

Multicomponent Systems Pricing: Rational Inattention and Downward Rigidities

AUTHOR(S)
Ray, Sourav; Wood, Charles A.; Messinger, Paul R.
PUB. DATE
September 2012
SOURCE
Journal of Marketing;Sep2012, Vol. 76 Issue 5, p1
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The authors examine the relative magnitude of price reductions for product systems and their constituent components (e.g., cameras, computers, monitors, lenses) and hypothesize that these price reductions systematically vary across different types of systems. The authors offer rational inattention as an explanation and document patterns of downward rigidity in online prices of computers and cameras that are consistent with this view. Their basic argument is that under certain circumstances, it is rational for consumers to ignore small price changes. This results in some price rigidity because firms would see no demand effect for small reductions. The authors suggest that this inattention systematically varies across different types of multicomponent systems, leading to specific hypotheses about sellers' pricing behavior. They first check the validity of their theoretical arguments using data from two surveys of consumers and managers. They then examine 669,557 daily price listings for 1052 high-end cameras and computers from 102 online vendors and find evidence consistent with their predictions. Using publicly available web traffic data, the authors also find that their predicted pricing behavior is aligned with better traffic response for the firm.
ACCESSION #
79787826

 

Related Articles

  • The Effect of Location on Price Estimation: Understanding Number-Location and Number-Order Associations. Fengyan Cai; Hao Shen; Hui, Michael K. // Journal of Marketing Research (JMR);Oct2012, Vol. 49 Issue 5, p718 

    The location in which a product is presented can influence consumers' numerical estimates of product attributes (e.g., price). This effect can be driven by two alternative processes. First, people may have acquired a learned association between numerical magnitude and location as a consequence...

  • Decoding Customer-Firm Relationships: How Attachment Styles Help Explain Customers' Preferences for Closeness, Repurchase Intentions, and Changes in Relationship Breadth. MENDE, MARTIN; BOLTON, RUTH N.; BITNER, MARY JO // Journal of Marketing Research (JMR);Feb2013, Vol. 50 Issue 1, p125 

    Many firms strive to create relationships with customers, but not all customers are motivated to build close commercial relationships. This article introduces a theoretical framework that explains how relationship-specific attachment styles account for customers' distinct preferences for...

  • A Multicategory Model of Consumers' Purchase Incidence, Quantity, and Brand Choice Decisions: Methodological Issues and Implications on Promotional Decisions. Mehta, Nitin; Ma, Yu // Journal of Marketing Research (JMR);Aug2012, Vol. 49 Issue 4, p435 

    The authors propose a multicategory model of consumers' purchase incidence, quantity, and brand choice decisions. The model specification allows for cross-category promotion effects in both components of the primary demand (incidence and quantity decisions) and uses a flexible functional form of...

  • Do We Need Involvement to Understand Consumer Behavior? Poiesz, Theo B. C.; de Bont Cees, J. P. M. // Advances in Consumer Research;1995, Vol. 22 Issue 1, p448 

    In this paper the literature on the involvement concept is reviewed. One of the conclusions is that the cumulation of knowledge on involvement is hampered by the tack of conceptual clarity, the seemingly uncontrolled application, the overlap with presumed antecedents and consequences, and the...

  • Measuring Perceived Brand Parity. Muncy, James A. // Advances in Consumer Research;1996, Vol. 23 Issue 1, p411 

    Perceived brand parity relates to the perception among consumers that all major alternatives in a product class are similar. Though high levels of brand parity greatly concerns many marketing professionals, scant empirical research has been published on the topic. The current paper presents the...

  • From the Editor: POETRY IN ADVERTISING. Zinkhan, George M // Journal of Advertising;Dec94, Vol. 23 Issue 4, pIII 

    The Journal of Advertising is published to contribute to the development of advertising theory and its relationship to advertising practices and processes. Poetry is not necessarily theoretical, but it is certainly metaphysical (i.e., Alexander Pope's word for philosophical). Poets create a kind...

  • Reduce New Product Failures: Measure Needs As Well As Purchase Interest. Tauber, Edward M. // Journal of Marketing;Jul1973, Vol. 37 Issue 3, p61 

    Present market research may deceive us to introduce products with limited potential because consumers may be favorably disposed to a new brand yet have no need for it. This paper presents an approach for measuring perceived needs and tells how this measure relates to the traditional purchase...

  • Multivariate Analysis of Multiple Response Data. Edwards, Yancy D.; Allenby, Greg M. // Journal of Marketing Research (JMR);Aug2003, Vol. 40 Issue 3, p321 

    Multiple response questions, also known as a pick any/J format, are frequently encountered in the analysis of survey data. The relationship among the responses is difficult to explore when the number of response options, J, is large. The authors propose a multivariate binomial probit model for...

  • An Attitudinal Framework for Advertising Strategy. Boyd Jr., Harper W.; Ray, Michael L.; Strong, Edward C. // Journal of Marketing;Apr1972, Vol. 36 Issue 2, p27 

    Is it realistic to consider advertising strategy in terms of more than just levels on a "hierarchy of effect?" The authors report that it is. They present a fives alternative framework for advertising strategy based on attitude research which relates product and brand perceptions to consumer...

Share

Read the Article

Courtesy of VIRGINIA BEACH PUBLIC LIBRARY AND SYSTEM

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics