How Do We Perceive Prices? A Three-category Taxonomy of Reference Price Effect on Consumers’ Price Judgments

Abstract

Aims: Price is one of the pivotal determinants when consumers make purchasing decisions. An unresolved issue in extant literature regarding factors that affect price referencing remains. The difficulty is in identifying types of price references that consumers will use in any given purchasing situation. This study hence proposed a new scheme of three-category taxonomy of reference price model and can be used as a conceptual framework for examining the effects of various reference prices on consumers’ price judgments. Methodology: A literature review and theoretical background lead to propositions. Conclusion: This research not only fills the literature gaps of referencing prices on consumer price judgments but also a three-category reference price model is developed. The present study goes beyond previous work in this field and a comprehensive set of reference price cues that influence consumers’ final reference price formation.  This new model gives future research a direction to test and refine relationships proposed in the present study.