study expand

A study expands and integrates prior price-perceived value models within the context of price comparison advertising. More specifically, the conceptual model explicates the effects of advertised selling and reference prices on buyer's internal reference prices, perceptions of quality, acquisition value, transaction value, and purchase and search intentions. Two experiments are used to test the hypothesis. Results indicate that the experiments support the hypothesis that buyer's internal reference prices are influenced by both advertised selling and reference prices as well as the buyer's perception of the product's quality. In addition, the effect of advertised selling price on buyers' acquisition value was mediated by their perceptions on transaction value, and the effects of perceived transaction value on buyers' behavioral interns were mediated by their acquisition value perceptions.

A study expands and integrates prior price-perceived value models within the context of price comparison advertising. More specifically, the conceptual model explicates the effects of advertised selling and reference prices on buyer's internal reference prices, perceptions of quality, acquisition value, transaction value, and purchase and search intentions. Two experiments are used to test the hypothesis. Results indicate that the experiments support the hypothesis that buyer's internal reference prices are influenced by both advertised selling and reference prices as well as the buyer's perception of the product's quality. In addition, the effect of advertised selling price on buyers' acquisition value was mediated by their perceptions on transaction value, and the effects of perceived transaction value on buyers' behavioral interns were mediated by their acquisition value perceptions. 

Headnote

Theauthors expand and integrate prior price-perceived value models within thecontext of price comparison advertising. More specifically, theconceptual model explicates the effects ofadvertised selling and reference prices on buyers' internal reference prices, perceptions ofquality, acquisition value, transaction value, and purchase and search intentions. Two experimental studies test theconceptual model. The resultsacross these two studies, both individually and combined, support thehypothesis that buyers' internal reference pricesare influenced by both advertised selling and reference pricesas well as the buyers' perception of theproduct's quality. Theauthors also find that the effect ofadvertised selling price on buyers' acquisition value was mediated by their perceptions oftransaction value. In addition, the effects ofperceived transaction value on buyers' behavioral intentions were mediated by their acquisition value perceptions. Theauthors suggest directions for further research and implications for managers.

To compete successfully in a value-conscious environment, sellers must stress thevalue oftheir offerings. One value-based strategy involves emphasizing thevalue ofacquiring theproduct (i.e., acquisition value) (Monroeand Chapman 1987). Sellers can increase acquisition value perceptions by enhancing buyers' perceptions of theproduct's quality or benefits relative to theselling price(Bolton and Drew 1991; Dodds, Monroe, and Grewal1991; Monroeand Krishnan1985; Zeithaml 1988). Thus, firms might opt for one ofthree value-based positioning strategies-high quality, low price, or some balance ofquality to price.

Sellers also can compare a lower selling priceto a higher advertised reference price(e.g., was $200, now $150) to enhance buyers' value perceptions. This value-oriented strategy is aimed at enhancing buyers' deal perceptions (or transaction value). Stressing the pricebargain the buyerwould be getting by undertaking thetransaction can effectively promote theoffering (i.e., increasing thesalience of thereduction in theselling price). Unfortunately, previous research has not examined the effects of price-comparisonor reference-price advertising on buyers' perceptions ofacquisition value, transaction value, or behavioral intentions. There is need for researchers to understand why this pricetactic (i.e., price-comparison advertising) seemingly works. From such information, effective value-oriented promotions could be developed. Furthermore, pricepromotions have become so widespread that several State's Attorneys' General offices (e.g., Maryland, New York, Colorado) have become concerned that some sellers use "value pricing" to deceive buyers(Grewaland Compeau 1992; Kaufmann, Smith, and Ortemeyer 1994).

In this article, we provide an understanding ofhow price-comparison advertisingcould influence buyers' perceptions ofvalue and establish a framework for addressing thedeception issue. Theconceptual argument suggests that advertised reference pricesin these deal-oriented advertisements can enhance buyers' internal reference prices(Lichtenstein and Bearden 1989; Urbany, Bearden, and Weilbaker 1988). These enhanced internal reference prices, when compared with thelower selling price, resultin higher transaction value perceptions. Theincrease in perceived transaction value enhances purchases and reduces search behavior for lower prices. If sellers intentionally increase theadvertised reference pricesabove normal retail prices, that is, inflate advertised reference prices, theresulting inflated perceptions oftransaction value would be deceptive. Harm to both buyersand competitors could resultfrom the effect of theinflated transaction value on buyers' search and purchase behaviors.

In addition, past research has not addressed theconceptual distinction between acquisition and transaction value, nor whether it is empirically feasible to make this distinction. Theresearch reported in this article addresses this important limitation. We develop a conceptual model that outlines how advertised pricing tactics (i.e., comparison price-advertising) affect buyers' purchase decisions. Then we present two tests of theconceptual model and discuss the resultsand their implications.

TheConceptual Model

In price-comparison advertising, a higher advertised comparison price(commonly termed advertised reference price) is compared with a lower advertised selling price. Buyers' judgments ofthese advertised pricesdepend not only on the pricesper se, but also on thecontextual cues presented within theadvertisement, situational influences surrounding buyers, and buyers' internal reference prices(Rajenderan and Tellis 1994). Theproposed model has two exogenous constructs (advertised reference priceand advertised selling price) and six endogenous constructs (buyers' perceptions ofproduct quality, their internal reference price, perceived transaction value, perceived acquisition value, willingness to buy, and search intentions) (see Figure 1). Each ofthese constructs and therelationships between them are explained subsequently.

Perceived Quality

Several past studies have examined the effects ofinformation cues, such as price, on buyers' perceptions ofquality (see reviews by Monroeand Krishnan1985; Rao and Monroe1989; Zeithaml 1988). Perceived quality is defined as a buyer's estimate ofa product's cumulative excellence (Zeithaml 1988). Thegeneral consensus ofthese studies is that priceis less likely to have a significant effect on buyers' perceptions ofquality in thepresence ofother attributes and when buyersare familiar with theproduct or product category (Rao and Monroe1988, 1989). In addition, there is evidence in thedomain ofcomparative price advertisingthat these advertised prices(both thereference priceand theselling price) do not have an effect on buyers' perceptions ofquality (see Grewal1989; Urbany and Bearden 1990).

Consequently, subjects exposed to a comparative priceoffer for a well-known brand (Dodds, Monroe, and Grewal1991), in thepresence ofseveral cues (including a picture of theproduct) (Grewal1989; Rao and Monroe1989), and having familiarity and knowledge of theproduct category (Rao and Monroe1988) are not likely to use these advertised pricesto shift their perceptions ofquality. Therefore, in theproposed model, we do not expect theadvertised selling priceand theadvertised reference priceto affect buyers' perceptions ofquality. However, we test for these paths.

Internal Reference Price

Theconcept ofinternal reference price, while operationally elusive, is an important cornerstone for behavioral priceresearch. In this research, an internal reference priceis defined as a price(or pricescale) in buyers' memories that serves as a basis for judging or comparingactual prices(Monroe1973; Monroe, Grewal, and Compeau 1991).

Della Bitta, Monroe, and McGinnis (1981) use adaptation-level theory to argue that buyers' internal reference pricesare influenced by thekey focal cues in an advertisement: theadvertised selling priceand theadvertised reference price. Furthermore, adaptation-level theory suggests that these internal reference pricesare influenced by residual cues (e.g., previously acquired information that has been assimilated to form perceptions and/or expectations of thequality ofproducts in a product category or a specific brand). Buyersforming an initial level ofperceived quality for theproduct and/or brand depend oninformation in theadvertisement and onpreviously acquired information (Herr 1989). Using this level ofperceived quality for theproduct and/or brand and theadvertised prices(sales and reference) as a basis, buyersdevelop internal reference prices(or pricescales) to be used during subsequent judgments ofvalue. Thepossibility ofa perceived quality to the pricemapping phenomenon has been illustrated by Monroe(1973). Consequently, advertised reference price, advertised selling price, and perceived product quality positively influence buyers' internal reference prices(Lichtenstein and Bearden 1989; Urbany, Bearden, and Weilbaker 1988). This conceptualization leads to thefollowing three paths in theconceptual model:

HI: There is a positive relationship between buyers' perceptions ofquality and their internal reference price.

H2: There is a positive relationship between advertised selling priceand buyers' internal reference price.

H3: There is a positive relationship between advertised reference priceand buyers' internal reference price. 

Buyers' internal reference pricesadapt to thestimuli pricespresented in theadvertisement. That is, buyerseither adjust their internal reference priceor accept theadvertised reference priceto make judgments about theproduct's value and thevalue of thedeal. Our conceptual model onhow comparison price advertisinginfluences buyers' perceptions ofvalue explicitly recognizes this adaptive nature of buyers' internal reference prices.

Perceived Acquisition Value

Past acquisition value-based models (e.g., Dodds, Monroe, and Grewal1991; Zeithaml 1988) have defined this concept as theperceived net gains associated with theproducts or services acquired. That is, theperceived acquisition value of theproduct will be positively influenced by thebenefits buyersbelieve they are getting by acquiring and using theproduct and negatively influenced by themoney given up to acquire theproduct (i.e., theselling price). One important element ofthis "get" component is product quality or buyers' perceptions ofproduct quality. 1

Several researchers have conceptualized acquisition value in this manner, though they used different termssuch as "bargain value" (Keon 1980), "perceived value" (Dodds, Monroe, and Grewal1991; Lichtenstein and Bearden 1989; Monroeand Krishnan1985; Urbany, Bearden, and Weilbaker 1988), "perceived worth" (Szybillo and Jacoby 1974), "acquisition utility" (Thaler 1985), and "value consciousness" (Lichtenstein, Netemeyer, and Burton 1990; Lichtenstein, Ridgeway, and Netemeyer 1993). Therefore, defining perceived acquisition value as the buyers' net gain (or tradeoff) from acquiring theproduct or service represents "a more global and enduring kind ofvalue which takes into account both priceand quality" (Urbany and Bearden 1990, p. 4). This conceptualization leads to thefollowing paths in theconceptual model:

H4: There is a positive relationship between buyers' perceptions ofquality and their perceived acquisition value. 

H5: There is a negative relationship between theadvertised selling priceand buyers' perceptions ofacquisition value.

Perceived Transaction Value

Buyersexposed to price-comparisonadvertisements and similar pricepromotions are presented with an expressed deal or bargain in terms ofa selling pricethat is explicitly reduced in magnitude. They are likely to assess themerits or value ofsuch a deal by comparing theselling priceto their internal reference prices(Monroeand Chapman 1987; Thaler 1985). For example, in a recent interpretive study of buyers' reactions to price-deals, one shopper indicated thefollowing: "Sometimes if I get a good deal at thediscount rack, I feel good about that and I'll stroll through theother parts [of themall or store] and not feel guilty if I buy more expensive, originally priced items" (Grewaland Compeau 993, p. 11).

Therefore, a buyer, onexamining thefinancial terms of the priceoffer, might perceive additional value beyond that provided by acquisition value. Thus, perceived transaction value is theperception ofpsychological satisfaction or pleasure obtained from taking advantage of thefinancial terms of the pricedeal (Lichtenstein, Netemeyer, and Burton 1990; Monroeand Chapman 1987; Thaler 1985; Urbany and Bearden 1989). This conceptualization leads to thefollowing paths in theconceptual model:

H6: There is a positive relationship between buyers' internal reference priceand their perceived transaction value.

H7: There is a negative relationship between theadvertised selling priceand buyers' perceptions oftransaction value.

Effects ofAcquisition and Transaction Value onWillingness to Buy and Search Intentions

Willingness to buy is defined as thelikelihood that the buyerintends to purchase theproduct (Dodds, Monroe, and Grewal1991). All things being equal, willingness to buy is positively related to overall perceptions ofacquisition and transaction value (Della Bitta, Monroe, and McGinnis 1981; Monroeand Chapman 1987; Urbany and Dickson 1990; Zeithaml 1988). Buyers' willingness to buy is positively linked to their perceptions ofacquisition and transaction value:

H8: There is a positive relationship between buyers' perceptions ofacquisition value and their willingness to buy. H9: There is a positive relationship between buyers' perceptions oftransaction value and their willingness to buy. Search intention is defined as a buyer's willingness to search for additional priceinformation. Stigler (1961) suggests that because ofvariations in pricein themarketplace buyersgenerally are uncertain what thelowest available priceis. To reduce this uncertainty, buyersmust seek information from sellers. Willingness to search for priceinformation is contingent on buyers' trading off theperceived benefits (e.g., money saved) relative to thecosts of thesearch (e.g., time, money, effort spent in conducting thesearch) (Marmorstein, Grewal, and Fishe 1992). Previous research shows that when buyersare exposed to an advertised regular pricecoupled with a lower sale price, their willingness to conduct additional search declines because ofan increase in their perceptions ofvalue (Della Bitta, Monroe, and McGinnis 1981; Urbany, Bearden, and Weilbaker 1988). Therefore, buyers' intentions to search is linked negatively to their perceptions ofacquisition and transaction value:

H10: There is a negative relationship between buyers' perceptions ofacquisition value and their intentions to search.

H11: There is a negative relationship between buyers' perceptions oftransaction value and their intentions to search.

An Alternative Model

A key issuethat must be addressed is whether perceived transaction value and perceived acquisition value are interrelated. Similar to Thaler's (1985) conceptualization and Monroeand Chapman's (1987) model, theproposed model (Figure 1) assumes that buyers' perceptions ofacquisition and transaction value are independent ofeach other. However, there are several potential reasons that suggest these two value dimensions are not independent ofeach other. Conceptually and operationally, theinterrelationship between these two value dimensions has not been addressed by previous research (cf. Urbany and Bearden 1990).

It is reasonable to propose that a pricepromotion that leads to positive perceived transaction value (i.e., greater psychological pleasure associated with obtaining favorable financial terms) would in turn influence buyers' perceptions of thevalue ofacquiring theproduct or receiving theservice (i.e., greater net gain by reducing thefinancial outlay). It is proposed that positive perceived transaction value enhances buyers' evaluations of thevalue ofacquiring theproduct. Buyers' perceptions oftransaction value are situation specific, and though their assessments ofacquisition value are more holistic evaluations of theproduct's value, it is likely that their transaction value influences their perceptions ofacquisition value and not vice versa.

Thetwo constructs have an overlapping antecedent construct, theadvertised selling price. Drawing onequity notions from satisfaction research (see Bolton and Drew 1991; Oliver and Swan 1989), transaction value could be considered akin to thefairness construct (i.e., theequity/pleasure associated with getting a fair price) (see also Huppertz, Arenson, and Evans 1978), and acquisition value similar to theoverall satisfaction construct (Grewal1995). Research in this post-purchase domain suggests that buyers' assessment ofequity affects their overall evaluations. Theparallel in thepre-purchase domain is that perceived transaction value affects perceived acquisition value.2 This conceptualization leads to thefollowing additional path: H12: There is a positive relationship between buyers' perceptions oftransaction value and their perceived acquisition value.

Hl2 suggests that sellers also might influence buyers' evaluations of thevalue of theproduct (i.e., acquisition value) indirectly through the effects ofcomparative advertised reference prices on buyers' perceived transaction value. This suggestion also leads to thepossibility that the effect ofadvertised selling price on buyers' acquisition value might be mediated by their perceptions oftransaction value. It also leads to thepossibility that the effect ofperceived transaction value onbehavioral intentions could be mediated by perceived acquisition value.

On thebasis ofthese proposed revisions, an alternative model (Figure 2) also is tested. Thealternative model hypothesizes a link between perceived transaction value and perceived acquisition value. The effects ofadvertised selling price onacquisition value are expected to be mediated by transaction value (i.e., no significant direct effect ofadvertised selling price onacquisition value). Therevised model also hypothesizes that the effects ofperceived transaction value onbehavioral intentions are mediated by perceived acquisition value (i.e., no significant direct effects ofperceived transaction value onpurchase and search intentions). In addition, theno-effectpaths pertaining to advertised selling priceand advertised reference price on buyers' perceptions ofquality have been dropped.

Research Method Research Plan

These hypotheses (and models) were tested using causal modeling. Two studies were conducted. Both studies used a 2 x 2 between-subjects experimental design, that is, two selling pricelevels ($249.95 and $349.95) and two advertised reference pricelevels ($400 and $500).3 In both studies, thesubjects were shown a booklet containing an advertisement for a bicycle and a questionnaire. Theadvertisement used a known brand name (Raleigh USA). Thesubjects then responded to a set ofquestions that assessed thevarious latent constructs.

In Study 1, a laboratory experiment, thesubjects were 361 undergraduate students at a western state university. Themean age ofrespondents in Study I was 23 years (range 18-49), 52.9% of therespondents were male, and 76.1% owned a bicycle. In Study 2, an experimental survey assessing thereplicability and theboundary conditions ofStudy l's results, thesubjects were staff employees at thesame university. Of the600 employees surveyed, 328 responded, a 54.6% response rate. To motivate a response, $125 in prizes were awarded by lottery. Themean age ofrespondents in Study 2 was 41 years (range 24-62), median family income was $40,000-$50,000, 37.6% of therespondents were male, and 71.6% owned a bicycle.

Pretests

A series ofpretests were conducted. Thefirst provided information about thesubjects' knowledge, involvement, and acceptable pricerange for bicycles. The resultsindicate that a bicycle was a personally relevant product and thus was selected as thetest product. Because Rao and Monroe(1988) found that product knowledge affected buyers' subjective product evaluations, another objective ofthis pretest was to determine a product about which subjects were knowledgeable. The resultsindicate that subjects exhibited high levels ofproduct familiarity with this specific product (i.e., a Raleigh USA bicycle). The resultsand a market survey of pricessuggest that $400 was around theaverage market priceand $500 was an above-average market price(i.e., an inflated advertised reference price) for this bicycle. Three additional pretests were used to develop thescales for thevarious latent constructs, particularly acquisition value and transaction value.

4

Measures

Thescales used to measure thelatent constructs are provided in Table 1. Theconstructs of buyers' perceptions ofquality, acquisition value, transaction value, willingness to buy, and search intention were assessed using seven-point category rating scales. Buyers' internal reference priceswere dollar estimates provided by thesubjects.

Perceived quality. Buyers' quality perceptions were measured using three Likert statements (Dodds, Monroe, and Grewal1991; Rao and Monroe1988) that assessed theproduct's quality, durability, and reliability.

Internal reference price. Buyers' internal reference pricewas assessed using two common measures: average market priceestimate and fair priceestimate. These two items were based onscales developed by Lichtenstein and Bearden ( 1989) and Urbany, Bearden, and Weilbaker (1988).

Perceived acquisition value. Buyers' acquisition value was measured using nine Likert statements that built onpast scales ofperceived value (e.g., Chapman and Monroe1990; Dodds, Monroe, and Grewal1991). However, theproposed measure ofperceived acquisition value is more comprehensive than thethree- or four- item scales previously used that focused on"good value for themoney." We explicitly attempted to capture thetrade-off between a product's benefits and thecost ofits acquisition. For example, sample items included thefollowing: "I feel that acquiring this bicycle meets both my high-quality and low-pricerequirements;" "I would value this bicycle as it would meet my needs for a reasonable price;" and "This bicycle would be a worthwhile acquisition because it would help me exercise at a reasonable price."

Perceived transaction value. Past research has had considerable problems measuring buyers' perceptions oftransaction value and developing a scale that discriminates adequately from perceived acquisition value. On thebasis ofour pretests and research by Lichtenstein, Netemeyer, and Burton ( 1990), we measured perceived transaction value using three Likert statements. These statements seem to capture theessence oftransaction value-thepleasure buyersget from finding and taking advantage ofa pricedeal (e.g., "taking advantage ofa pricedeal like this makes me feel good"). Principal component analysis of theacquisition and transaction value scales demonstrates that thetwo scales discriminate in both studies (see Table 2).

Willingness to buy. A three-item scale, based onDodds, Monroe, and Grewal's (1991) study, measured buyers' willingness to buy. Thespecific items were anchored from "very low" to "very high."

Search intentions. Buyers' intentions to search for additional information (e.g., visit other stores to check their prices) were measured using three Likert statements that were based onprior research by Della Bitta, Monroe, and McGinnis (1981).

Analysis and Results

Plan for Data Analysis

Thedata from thetwo studies were analyzed in two stages. Themeasurement model was assessed to confirm that thescales were unidimensional and reliable. When thereliability of themeasures had been established, thestructural model was tested using LISREL-VII causal modeling procedures (Joreskog and Sorbom 1989). This testing determined thestrength ofindividual relationships, themodel's goodness offit, and thevarious hypothesized paths. Thetwo-step procedure followed here reduces thenumber ofinterpretational confounds. PRELIS was used to generate theinput matrix.

Measurement Properties of theScales

Thescales used to measure thelatent constructs in themodel are provided in Table 1. Item reliability, variance extracted, and construct reliability also are shown. Theassessment of themeasurement properties ofall six scales indicated that thefactor loadings (lambdas) were high and significant (p < .001), which satisfies thecriteria for convergent validity. Anderson (1987) suggests thefollowing criterion for assessing discriminant validity between scales: Thecorrelation between two latent constructs plus or minus two standard errors does not include one. All six scales met this criterion in both studies. Furthermore, Fornell and Larcker (1981) suggest that discriminant validity can be assessed by determining whether thevariance extracted estimates for two constructs are greater than thesquare of theparameter estimate between them . Thesix measured constructs met this criterion in both studies. We also assessed thediscriminant validity of thescales using confirmatory factor analysis procedures (Anderson and Gerbing 1988). The results ofeach pairwise construct comparisonsuggest that thetwo factor solution was better than thesingle factor solution (see theAppendix).

Fornell and Larcker (1981) also stress theimportance ofexamining composite reliability and variance extracted. Bagozzi and Yi (1988) suggest two criteria: Composite reliability should be greater than or equal to .60, and variance extracted should be greater than or equal to .50. For both studies, all six composite reliabilities were greater than .75, and all six variances extracted were greater than .55 (see Table l). Finally, we analyzed thestructural model using summated scales and obtained similar results, which suggests that themeasurement-structure interaction was minimal.

Model Fit

Thecausal models in Figures I and 2 were assessed using a full-information method. Thecausal models were specified as shown in thefigures. ThePHI, PSI, TD, and TE matrices were diagonal and free. Thetheta-deltas associated with advertised selling priceand advertised reference pricewere fixed. Errors were treated independently to avoid interpretational confounds. Thelambda matrices (both X and Y) were full and fixed. Then theindividual items associated with theexogeneous and endogeneous constructs were freed. However, one of thelambdas for each construct was set to 1.0 to properly define themeasurement (see Joreskog and Sorbom 1989).

Theoverall fit of thestructural model was determined initially by examining theZ2 statistics for each study, which were significant. A significant 2 statistic could indicate an inadequate fit, but this statistic is sensitive to sample size and model complexity; therefore, rejection ofa model on thebasis ofthis evidence alone is inappropriate (Bagozzi and Yi 1988; Bearden, Sharma, and Teel 1982; Marsh, Balla, and McDonald 1988). Accordingly, other measures offit compensating for sample size also were applied: Bentler and Bonett's (1980) normed fit index (A), Tucker and Lewis's (1973) non-normed fit index (p), and Bentler's (1990) comparative fit index (CFI). Each ofthese indices showed an adequate fit: A was .88 (Study 1) and .89 (Study 2); p was .91 (Study 1) and .90 (Study 2); CFI was .93 and .91 for Study I and 2, respectively (see Table 3).

Hypotheses Tests

Thestandardized estimates for thevarious model paths and theassociated t-values for thetwo studies are provided in Table 3. Thestructural path estimates for themodel furnished in Table 3 should be read with thecaveat that our data are causal only for the effects ofadvertised reference priceand advertised sale price. For all other relationships, our data are correlational, and thecausal direction is based onprior theory.

Advertised pricesand perceived quality. As expected, advertised selling priceand advertised reference pricedid not affect buyers' perceptions ofquality significantly.

Influences oninternal reference price. These resultssupport H1, H2, and H3, which indicates that buyers' internal reference pricesare functions ofperceived quality, advertised selling price, and advertised reference price. Previously, Urbany, Bearden, and Weilbaker ( 1988) demonstrated thecapability ofadvertised reference pricesto serve as anchors and to shift internal reference pricesin their direction. Finally, Hyun (1993), using Korean subjects, demonstrated a positive relationship between advertised selling pricesand subjects' internal reference prices. Thus, our resultscomplement past research and are consistent with predictions based onadaptation-level theory.

Influences onperceived acquisition value. In both studies, perceived acquisition value is a positive function ofsubjects' perceptions ofquality (H4 is supported). This relationship has previous empirical support (Dodds, Monroe, and Grewal1991; Hyun 1993). Therefore, we provide empirical support in a price comparisoncontext for theproposition that perceived acquisition value is influenced, in part, by buyers' perceptions ofquality. (Substantively, as mentioned previously, theliterature stresses that perceived quality is an important part of the"value equation.")

Thehypothesized influence of theadvertised selling price onperceptions ofacquisition value was supported in both studies (H5 is supported). Theoverall available evidence presented here supports thetheoretical proposition and thelay belief that selling priceis a negative element of buyers' perceptions ofacquisition value.

Influences onperceived transaction value. Themodel in Figure 1 suggests that perceived transaction value is a function of buyers' internal reference pricesand theactual selling price. As is shown in Table 3, these relationships were supported by both studies (H6 and H7 are supported). There is a significant negative relationship between theactual selling priceand subjects' perceptions oftransaction value. Moreover, there is a positive relationship between subjects' internal reference pricesand their perceptions oftransaction value. Thus, thetheoretical arguments for theinfluence ofselling priceand buyers' internal reference prices on buyers' perceptions oftransaction value (i.e., theperceived merits of theoffer) have empirical support.

Value perceptions and behavioral intentions. Della Bitta, Monroe, and McGinnis ( 1981 ) observe that buyers' positive perceptions ofvalue were a necessary but insufficient condition to induce willingness to buy. Other research has found a positive relationship between perceptions ofvalue and willingness to buy (Dodds, Monroe, and Grewal1991; Hyun 1993). However, previous research efforts measured themore global construct-perceived value. In thecurrent empirical effort, we decompose perceived value into two theoretical components: perceived acquisition value and perceived transaction value.

The resultsshown in Table 3 indicate a significant positive relationship between perceived acquisition value and willingness to buy (HK is supported). Thedirect relationship between perceived transaction value and willingness to buy, though positive, is weak overall and not statistically significant in thesecond study (partial support for Hg). Similarly, thenegative relationship between perceived acquisition value and search intentions is significant in both studies (Hio is supported). Therelationship between perceived transaction value and search intentions was not supported (no support for HI,).

Test of theAlternative Model, H12, and Mediating

Hypotheses

Alternative model. A key theoretical argument of thealternative model presented in Figure 2 is that perceived transaction value has a positive influence onperceived acquisition value. Theempirical relationships provided in Table 4 strongly support this relationship in both studies (H12 is supported). Previous efforts to decompose perceived value into its theoretical acquisition value and transaction value components have had measurement flaws. As is demonstrated in Tables 1 and 2, theresearch reported here has overcome theinherent measurement difficulties presented by these two concepts.

The results of thealternative model also are presented in Table 4. Themodel hypotheses are supported in both studies. Furthermore, therevised model (with four fewer paths) fits thedata as well as thecomplete model (e.g., theCFI statistic was thesame for both models). These resultsfurther validate our propositions that the effect ofselling price onperceived acquisition value is mediated by perceived transaction value and that the effects ofperceived transaction value onpurchase and search intentions are mediated by

Discussion

Conceptual Developments

As has been noted, price comparison advertisingis a widely used pricepromotion tactic. Although research investigating issues on therelative effectiveness ofthis tactic spans nearly 20 years, we are still trying to understand how and why it works. Drawing onprior research (e.g., Monroeand Chapman 1987; Thaler 1985), we provide a theoretical argument for why such pricepromotional tactics (and other similar forms) influence buyerbehavior.

Previous empirical efforts to decompose theconcept ofoverall perceived value into thetwo independent constructs ofperceived acquisition value and perceived transaction value encountered measurement problems (e.g., Chapman and Monroe1990; Grewal1989). Examining prior research efforts (e.g., Chapman and Monroe1990; Grewal1989) and comments onThaler's original conceptualization (Bearden et al. 1992) led to therevised model in Figure 2 and to thestronger measurement model presented here.

Prior research (i.e., Monroeand Chapman 1987; Thaler 1985) typically modeled these two value dimensions as independent ofeach other. There is thepossibility that one of thetwo value components is actually an antecedent of theother. Because, in theabsence ofa pricepromotion, thebasic perceived value model (see Dodds, Monroe, and Grewal1991; Zeithaml 1988) postulates that buyers' perceptions ofvalue are formed from a mental trade-off between perceived quality (or benefits) and price, it seems logical that buyerswould perceive a pricepromotion as enhancing theoverall value ofan acquisition. Thus, themodel in Figure 2 shows theconceptual adjustments, which suggests that perceived acquisition value is a function ofperceived quality and perceived transaction value (i.e., assessment of the priceoffer). Theadvertised selling priceaffects perceived acquisition value by its effect onperceived transaction value. As simple as this conceptualization seems, it represents an important addition to theresearch literature on therelationship between priceand buyers' perceptions ofquality and value.

Although this research emphasizes exploration of therelative effects of price comparison advertising on buyers' perceptions ofvalue, important insights also have been found about theinternal reference priceconcept. It has been conceptually argued and empirically confirmed that buyers' internal reference priceis influenced by both theseller's advertised (higher) reference priceand theadvertised (lower) selling price. Previous research demonstrates theinfluence of theadvertised reference price on buyers' internal reference prices(Urbany, Bearden, and Weilbaker 1988). As conceptualized by adaptation-level theory, this research also demonstrates that both pricespresented in a price comparisonadvertisement influence buyers' internal reference prices. Moreover, it has been shown that buyers' internal reference pricesare influenced by their relative assessments ofproduct quality. This finding is consistent with thetenets ofcognitive reference points and categorization theory (Herr 1989; Monroe, Grewal, and Compeau 1991).

Theconceptual argument by Thaler (1985) and Monroeand Chapman (1987) that perceived transaction value is a function of theselling priceand buyers' internal reference pricehas been confirmed empirically. Although Urbany and Bearden (1989) show thepositive relationship between buyers' internal reference priceand their perceptions oftransaction value, this is thefirst published research effort to demonstrate theapparent implied mental comparisonbetween theadvertised selling priceand buyers' internal reference prices.

Also ofconcern is whether perceived transaction value has a direct or indirect influence onwillingness to buy or intentions to search. Previous research offers convincing evidence on thedirect relationship between perceived (acquisition) value and measures ofbehavioral intentions. Our empirical evidence supports theidea that perceived transaction value influences willingness to buy and intentions to search through its effect onperceived acquisition value. This particular finding strengthens theargument that, in comparative price advertisingpromotions, perceived transaction value enhances buyers' perceptions ofacquisition value, and that these two components ofperceived value are not independent constructs.

Measure Development

Operationally, this research develops and validates separate measures ofperceived acquisition value and perceived transaction value (Table 1). One aspect ofthis measure development was to understand thepsychological pleasure that buyersmight experience when buying a product ondeal (i.e., obtaining a bargain). For further discussion onthis point, see Schindler (1989). Another contribution ofthis research is thedevelopment ofa unidimensional multi-item scale to measure buyers' internal reference price. Past research predominantly used single items that tapped into various aspects of theinternal reference pricescale (or continuum) (see Monroe, Grewal, and Compeau 1991). In addition, measures for perceived product quality and purchase and search intentions were further refined and validated (see Table 1).

Managerial Implications

A key managerial implication ofthis research is thedemonstration ofhow advertised prices(both reference and sale) provided in price comparisonadvertisements affect buyers' internal reference prices(i.e., higher advertised priceslead to higher internal reference prices). In turn, these internal reference pricesare linked to buyers' perceptions ofvalue and behavioral intentions. Focusing ononly thefinal price(or sale price) to theexclusion of thecontextual advertised (or display) reference priceby advertisers and retailers might be a strategic mistake. This issuecould be one of thereasons why the"everyday low price" strategy used by several retailers has not been successful.

The results ofour studies, in conjunction with past research (e.g., Lichtenstein and Bearden 1989; Urbany, Bearden, and Weilbaker 1988), suggest that inflated advertised reference priceshave thepotential to be deceptive (in our studies, the$500 advertised reference pricewas considerably higher than theaverage market price). These higher advertised reference pricesenhance buyers' perceptions oftransaction value, acquisition value, and purchase intentions and reduce buyerslikelihood ofsearching for a lower price. Furthermore, thepotential for deception is likely to be more pronounced for buyerswho have less priceand/or product knowledge. Theconcerns voiced by several State's Attorneys' General offices that value pricing could be used to deceive consumers seem to have merit. Consequently, State's Attorneys' General offices and theFederal Trade Commission must monitor such practices. In cases in which retailers and manufacturers use fictitious or inflated advertised reference pricesin their advertisements, appropriate action must be taken. Appropriate action by such agencies might include cease and desist orders, fines, and posted notices ofhow theretailer established theadvertised reference price.

Thecurrent research findings support thenotion that product quality perceptions enhance acquisition value and willingness to buy. Furthermore, past research shows that a high-quality position is important in developing brand equity and leads to higher market share and profitability in thelong run (Curry 1985; Jacobson and Aaker 1987; Phillips, Chang, and Buzzell 1983). Our results(crosssectional study) in conjunction with those based onPIMS databases (i.e., longitudinal) suggest that developing and maintaining a high-quality position is important for shortterm adoption and long-termdevelopment ofmarket share.

Thelack ofassociation between priceand quality perceptions in our two studies supports past research findings that a high-quality position is not necessarily incompatible with a low cost (or price) position (Phillips, Chang, and Buzzell 1983). Many manufacturers try to maximize value to buyersby offering above-average quality at reasonable prices(Curry 1985). This positioning can be achieved through well-designed pricepromotions that emphasize thefairness or reasonableness oftheir selling pricesand thereby enhance buyers' perceptions oftransaction value. Our findings suggest that buyers' perceptions oftransaction value enhances willingness to buy through their perceptions ofacquisition value.

Our study resultssuggest that acquisition value has considerable influence on buyers' willingness to buy. It must be noted that customers balance thebenefits of thepurchase against thecosts. Benefits can be functional, operational (e.g., durability, reliability), or personal (Shapiro and Jackson 1978). Costs include both financial (sale price) and nonfinancial aspects, such as time and effort (Zeithaml 1988). Today's information technology (e.g., through theInternet, consumer reports) enables buyersto compare benefits and priceswith 

unprecedented ease and accuracy. Managers must understand thevariables affecting theacquisition value of theproduct. They also must understand where their product fits ona continuum ranging from satisfying unique needs (e.g., CAT scanner) to satisfying undifferentiated needs (e.g., corn syrup) (Dolan 1995; Nagle and Holden 1995). Thus, manufacturers can position products that are unique using an acquisition value-enhancing strategy and those that are relatively undifferentiated from competitors using a transaction value-enhancing strategy.

Thestudy resultsalso suggest that thevarious value strategies (i.e., deal value versus product value) are important predictors ofbehaviors. In addition, past research suggests that thecost ofserving buyersand theeffectiveness ofvalue strategies might vary across segments (Lichtenstein, Netemeyer, and Burton 1990; Shapiro et al. 1987). That is, some segments are sensitive toward price, whereas others are more benefit oriented (in our studies, therelative effect ofacquisition value versus transaction value onwillingness to buy was greater for thenonstudent sample). Therefore, value perceived by buyerswill vary across segments. For some buyers, acquisition value might be more important than transaction value or vice versa. Managers should determine which value strategy is appropriate for their target segments and develop their positioning strategies appropriately.

Limitations and Avenues for Further Research

Further research should explore this study's limitations. For example, subjects were exposed to one type ofsemantic cue, theoriginal priceand selling pricecombination. Research using other product and semantic cues, such as "compare at, selling price," "MSLP, selling price," and "total value, selling price" would be worthwhile (see Grewal, Marmorstein, and Sharma 1996).

Another limitation ofthis research was Thaler's ( 1985) suggestion that buyers' acquisition utility (or value) should be equivalent to the comparison oftheir reservation pricewith theactual selling price. This research, following Monroeand Chapman's (1987) conceptualization, considered perceived acquisition value as a comparisonbetween buyers' perceptions ofquality and selling price. Although theapproach used here is consistent with theextant marketing practitioner beliefs, therelative role ofreservation price(or maximum acceptable price) should be explored as an alternative way to measure theget component of buyers' perceptions ofacquisition value. In addition, research must explore whether other factors such as usage flexibility, usage convenience, and need congruence affect buyers' perceptions ofacquisition value.

A related issuepertains to thefunctional form ofperceived acquisition value. Monroe( 1990) suggests a ratio (or proportional) model, but points out that this is only one means ofillustrating the comparison. Associated research on price-quality and price-warranty trade-offs supports a subtractive model (e.g., Levin and Johnson 1984; White and Truly 1989). Our resultsalso support a subtractive model.6 However, White and Truly (1989), using some important methodological variations, also show that some oftheir subjects apparently followed a proportional model ofinformation integration. Therefore, an important research issueis whether theinformation integration implied by theformation ofperceived acquisition value is represented best as a subtractive, ratio, or averaging model or as some other functional form. Finally, there is a need for research that involves examining whether thedegree ofbelievability of theadvertised reference price, believability of theselling price, believeabilty of theoverall priceoffer, and priceconsciousness influence buyers' perceptions oftransaction value.

Another issuethat warrants additional research addresses thedistinction between acquisition value and overall value. Overall perceived value can be conceptualized with many distinct components (Forbes and Mehta 1978), which could include thevalue of theacquisition, thevalue associated with thestart-up (e.g., a cellular phone with a recharger similar to an existing cellular phone will have greater value), and thevalue associated with reselling theproduct (e.g., some cars have greater resale value). Thus, research in business-to-business settings might need to distinguish, conceptually and operationally, acquisition value from overall value.

Research also must address how buyersform their internal reference prices. In this research, respondents' internal reference priceswere operationalized through point estimates oftheir expected normal, average, and fair prices. However, Klein and Oglethorpe (1987) suggest that internal reference pricescould be operationalized in a variety ofother manners, including by expected prices, pricelast paid, or aspiration price. Further-more, internal reference pricesalso may be operationalized as a pricerange (Monroe, Grewal, and Compeau 1991; Urbany and Dickson 1990). Therefore, further research must address whether these different bases for, and ways ofmeasuring, internal reference pricesyield similar results.

Although this study examines theeffectiveness of theframework in thecontext of price-comparisonadvertisements, further research is needed to test its effectiveness in explaining buyers' behavioral reactions to other pricepromotions (e.g., coupons, rebates) as well as pricechanges. Thegeneralizability of themodel should be examined by assessing thefit of themodel for different samples of buyers. Value-conscious segments, deal-prone segments, and segments that do or do not believe thedifference between theadvertised selling priceand theadvertised reference pricemight vary. Furthermore, thepredispositions of thesubjects could affect their perceptions. It would be useful to look at theindividual characteristics ofsubjects more closely and assess such variables as involvement, priceconsciousness, knowledge, and inclination to take risks.

Footnote

1 Thaler (1985) operationally defines this get component (or value equivalent) as theamount ofmoney that would leave theperson indifferent about receiving themoney or theproduct as a gift. In economic theory, thevalue equivalent is similar to thereservation price(themaximum price the buyeris willing to pay), and therefore acquisition value could be considered comparable to consumer surplus (Monroeand Chapman 1987; Thaler 1985). However, operationally defining thevalue equivalent (get component) simply as a reservation priceis a limited view, because it does not include the buyers' quality evaluation, except by indirect inference. Moreover, empirical evidence verifying that buyersuse such reservation priceswhen assessing thevalue ofa product is not available. For example, Bearden and collegues (1992) find no significant relationship between three price-estimate measures of thesubjects' reservation priceand their perceptions ofacquisition value or their willingness to buy.

Footnote

We thank an anonymous reviewer for this suggestion.

Footnote

3. We do not predict an interaction termbetween advertised selling priceand advertised reference price, in line with previous models, such as Monroeand Chapman's (1987). However, we did test for theinteraction term. MANOVA analyses onboth data sets indicated that theinteractions were not significant in either data set (p > .05). Furthermore, using LISREL procedures and modeling an interaction term, we did not find a significant effect of theinteraction oninternal reference price, acquisition value, and transaction value. Furthermore, the resultswith an interaction termsuggest a worse fit.

Footnote

4. 0ne of thepretests' (n = 400) resultsindicated that scales used by past research (e.g., Chapman and Monroe1990) to assess overall perceived value did not adequately discriminate acquisition value from transaction value. The resultssuggest a two-factor solution. That is, acquisition value and transaction value load onseparate factors, but overall value loads onboth factors. Thus, this research explicitly focuses onacquisition and transaction value and not onoverall value.

Footnote

5. Three conditions must be met to establish mediation : ( I ) theindependent variable affects themediator : (2) theindependent variable affects thedependent variable : and (3) when both theindependent variable and themediator are regressed on thedependent variable, themediator is significant, whereas the effect of theindependent variable is reduced. ANOVA and ANCOVA procedures suggested by Hastak and Olson (1989) (similar to Baron and Kenny [19861 procedures) were followed and supported theproposition that perceived transaction value mediates the effect ofselling price onperceived acquisition value. ANOVA resultsindicated a significant effect ofselling price onperceived transaction value (Study I: F([.344)= 12.IO, p < .OOI: Study 2: F(1,36)= 48.64, p < .()QI ) and perceived acquisition value (Study 1: F(I 344) = 7.57, p < OI; Study 2: F(1.316) = 25.87, lp < .OOI ). Furthermore, the effect ofselling price onperceived acquisition value was nonsignificant when perceived transaction value was treated as a covariate (Study

Footnote

1: Fti 3)= 1.26, p > .05; Study ?: Fti,315)=.57, p > .OS). In addition, thecovariate was significant (Study 1: Ft l 343) = 130.16, p < OOI: Study 2: FkI.315= 273.91, p < .OOI ). Procedures suggested by Baron and Kenny (1986) were followed to assess whether perceived acquisition value mediates the effect ofperceived transaction value on buyers' willingness to buy. We find that perceived transaction value significantly enhanced perceived acquisition value (Study 1: tt3,rt;46) = 11.43, p < .OOI; Study 2: t(318)= 16.59, p < .OOI ) and willingness to buy (Study I: t(353= 7.25,jp < .001; Study 2; t(3i = 9.99, p < .001). Furthermore, when both transaction value and acquisition value were regressed on buyers' willingness to buy, acquisition value significantly affected willingness to buy (Study 1: t(343= 10.28, p < .OOI: Study 2: t(317)= 12.29, p < .OOI ), while the effect oftransaction value was reduced and nonsignificant (Study 1: t(34= 1.41, p > .05; Study 2: t(317= 1.12; p > .OS). Thus, theregression resultssupport theproposition that the effect ofperceived transaction value onwillingness to buy is mediated by perceived acquisition value. Similarly, we find that perceived

Footnote  

transaction value significantly reduced search intentions only in Study 2 (Study I: th356) = -.66, p > .05; Study 2: t(322, = -3.34, p < .OOI ). Thus, mediation could only be tested in Study 2. When both transaction value and acquisition value were regressed on buyers` search intentions, acquisition value significantly affected search intentions (Study 2: t(316)= -3.74, p < .001), while the effect oftransaction value was reduced and non-significant (Study 2: t(316) = .09, p > .OS). As was found for willingness to buy, acquisition value serves to mediate therelationship between perceived transaction value and search intentions. We also tested themediation through nested models. We ran theproposed model (Figure 1 ) with an additional path (transaction value to acquisition value). The resultswere X2 of630 (Study 1) and 841 (Study 2), both with df = 263. A nested model with thethree fewer paths (no linkage between selling priceand acquisition value, no linkages from acquisition value to willingness to buy and search intentions) had Z2 of644.24 (Study I ) and 846.63 (Study 2), both with df = 266. Similar to theregression results, thenested model approach supports themediation hypotheses for Study 2.

Footnote

6. Acquisition value is conceptualized as a function ofperceived quality of theproduct and theselling price. Monroe( 1990) uses a ratio model but points out that this is only a way ofillustrating the comparison. Associated literature on price-quality trade-offs have found greater support for a subtractive model (e.g., Levin and Johnson 1984; White and Truly 1989). We conducted two regression analyses:

Model 1: Perceived acquisition value as a function ofperceived quality and advertised selling price.

Model 2: Perceived acquisition value as a function ofperceived quality, advertised selling price, and an interaction term.

Footnote

The results of theregression analysis indicate thefollowing: Model 1: Study I-F(2,301) = 78.67, adjusted R2 = .34; Study

2-F(2, 321) = 63.14, adjusted R2 = .28. Model 2: Study I-F(3,3oo) = 53. [, adjusted R2 = .347; Study 2-F(3.32o) = 42.66, adjusted R2 = .28.

Footnote

Interaction was not significant in either study. The resultssuggest that acquisition value might be represented best by a subtractive model. Resultsalso suggest that transaction value is represented by a subtractive model. Model 1: Study 1-F(2.3o) = 36.77, adjusted R2 = .19; Study 2-F(233 1)= 12.73, adjusted R2 = .07. Model 2: Study II-F(3,303) = 24.451, adjusted R2 = .195; Study 2-F(3,330) = 8.47, adjusted R2 = .07. Interaction was not significant in either study.

References

REFERENCES

References

Anderson, James C. (1987), "An Approach for Confirmatory Measurement and Structural Equation Modeling ofOrganizational Properties," Management Science, 33 (4), 525-41. and David W. Gerbing (l988), "Structural Equation Modeling in Practice: A Review and Recommended Two-Step Approach," Psychological Bulletin, 103 (3), 411-23. Bagozzi, Richard P. and Youjae Yi (1988), "On theEvaluation ofStructural Equation Models," Journal of theAcademy ofMarketing Science, 16 (Spring), 74-94.

Baron, Reuben M. and David A. Kenny (1986), "TheModeratorMediator Variable Distinction in Social Psychological Research: Conceptual, Strategic, and Statistical Considerations," Journal ofPersonality and Social Psychology, 51 (6), 1173-82.

References

Bearden, William O., Ajit Kaicker, Melinda Smith de Borrero, and Joel E. Urbany (1992), "Examining Alternative Operational Measures ofInternal Reference Prices," in Advances in ConsumCer Research. Vol. 19, John F. Sherry, Jr. and Brian Sternthal, eds. Provo, UT: Association for Consumer Research, 629-35.

, Subhash Sharma, and Jesse E. Teel (1982), "Sample Size Effects onChi-Square and Other Statistics Used in Evaluating Causal Models," Journal ofMarketing Research, 19 (November) 425 30.

Bentler, Peter M. (1990), "Comparative Fit Indexes in Structural Models," Psychological Bulletin, 107 (2), 238-46.

and Douglas G. Bonett (1980), "Significance Tests and Goodness ofFit in theAnalysis ofCovariance Structures," Psychological Bulletin, 88 (3), 588-606.

References

Bolton, Ruth N. and James H. Drew ( 1991), "A Multistage Model ofCustomers' Assessments ofService Quality and Value," Joun-al ofConsumer Research, 17 (March), 375-84. Chapman, Joseph D. and Kent B. Monroe(1990), "TheFraming Effects ofAlternative PricePromotions on Buyers' Subjective

References

Product Evaluations," working paper, Department ofMarketing, Ball State University.

Curry, David J. (1985), "Measuring Priceand Quality Competition," Journal ofMarketing, 49 (Spring), 106-17. Della Bitta, Albert J., Kent B. Monroe, and John M. McGinnis ( 1981), "Consumer Perceptions ofComparative PriceAdvertisements," Journal ofMarketing Research, 18 (November), 416-27.

Dodds, William B., Kent B. Monroe, and Dhruv Grewal(1991), "The Effects of Price, Brand, and Store Information on Buyers' Product Evaluations," Journal ofMarketing Research, 28 (August), 307-19.

References

Dolan, Robert J. (1995), "How Do You Know When the Priceis Right'?" Harvard Business Review, 73 (September/October), 174-83.

Forbes, John L. and Nitin T. Mehta ( 1978), "Value-Based Strategies for Industrial Producs," Busines Horizon.sz 21 (October), 25-31. Fornell, Claes and David F. Larcker (1981), "Evaluating Structural Equation Models with Unobservable Variables and Measurement Error," Journal ofMarketing Researrh, 18 (February), 39-50.

References

Grewal, Dhruv(1989), "The Effect ofIntrinsic, Extrinsic Cues and Reference Prices on Buyers' Perceptions ofQuality and Value," unpublished dissertation, Virginia Polytechnic Institute and State University.

(1995), "Product Quality Expectations: Towards an Understanding ofTheir Antecedents and Consequences," Journal ofBusiness and Psychology, 9 (Spring), 22540. and Larry D. Compeau (1992), "Comparative Price Advertising: Informative or Deceptive?" Journal ofPublic Policy & Marketing, II (Spring), 5242.

and ( 1993), "Consumers' Interpretations ofSemantic Phrases in Comparative PriceAdvertisements: Some Prelimi

References

nary Evidence ona Public Policy Issue," in Advances in Consumer Research, Vol. 20, Leigh McAlister and Michael Rothschild, eds. Provo, UT: Association for Consumer Research, 479-80.

, Howard Marmorstein, and Arun Sharma (1996), "Communicating PriceInformation Through Semantic Cues: The Effects ofSituation and Discount Size," Journal ofConsumer Research, 23 (September), 148-55.

Hastak, Manoj and Jerry C. Olson (1989), "Assessing theRole ofBrand-Related Cognitive Responses as Mediators ofCommunication Effects onCognitive Structure," Journal ofConsumer Research, 15 (March), 444-56.

Herr, Paul M. (1989), "Priming Price: Prior Knowledge and Context Effects," Journal ofConsumer Research, 16 (June), 67-75. Huppertz, John W., Sidney J. Arenson, and Richard H. Evans (1978), "An Application ofEquity Theory to Buyer-Seller Exchange Situations," Journal ofMarketing Research, 15 (May) 250(60. Hyun, Soeun (1993), "The Effects ofContextual Cues onConsumers' Perceptions ofComparative PriceAdvertisements," doctoral dissertation, Department ofMarketing, Virginia Polytechnic Institute and State University.

References

Jacobson, Robert and David A. Aaker (1987), "TheStrategic Role ofProduct Quality," Journal ofMarketing, 51 (October), 3 -44. Joreskog, Karl G. and Dag Sorbom (1989), LISREL VII: Analysis ofLinear Structural Relationships by theMethods ofMaximum Likelihood. Mooresville, IN: Scientific Software, Inc. Kaufmann, Patrick J., N. Craig Smith, and Gwen Ortmeyer (1994), "Deception in Retailer High-Low Pricing: A Rule ofReason Approach," Journal ofRetailing, 70 (Summer), I IS-38. Keon, John W. (1980), "TheBargain Value Model and a Comparison ofManagerial Implications with theLinear Learning Model," Management Science, 26 (November), 1117-30. Klein, Noreen M. and Janet E. Oglethorpe (1987), "Reference Points in Consumer Decision Making,'` in Advances in Consumer Research, Vol. 14, Melanie Wallendorf and Paul F. Anderson, eds. Provo, UT: Association for Consumer Research, 183-87. Levin, Irvin P. and Richard D. Johnson (1984), "Estimating PriceQuality Tradeoffs Using Comparative Judgments," Journal ofConsumer Research, II (June), 593-60.

References

Lichtenstein, Donald R. and William O. Bearden (1989), "Contextual Influences onPerceptions ofMerchant-Supplied Reference Prices," Journal ofConsumer Research, 15 (September), 55466. , Richard G. Netemeyer, and Scot Burton (1990), "Distinguishing Coupon Proneness from Value Consciousness: An Acquisition-Transaction Utility Theory Perspective," Journal ofMarketing, 54 (July), 54-67.

, Nancy M. Ridgeway, and Richard G. Netemeyer (1993), "PricePerceptions and Consumer Shopping Behavior: A Field Study," Journal ofMarketing Research, 30 (May), 234-45. Marmorstein, Howard, Dhruv Grewal, and Raymond P. H. Fishe (1992), "TheValue ofTime Spent in Price ComparisonShopping: Survey and Experimental Evidence," Journal ofConsumer Research, 19 (June), 5241.

References

Marsh, Herbert W., John R. Balla, and Roderick P. McDonald (1988), "Goodness-of-Fit Indexes in Confirmatory Factor Analysis: The Effects ofSample Size," Psychological Bulletin, 103 (3), 39110.

Monroe, Kent B. (1973), "Buyers' Subjective Perceptions of Price," Journal ofMarketing Research, 10 (February), 70-80. (1990), Pricing: Making Profitable Decisions, 2d ed. New York: McGraw-Hill.

and Joseph D. Chapman (1987), "Framing Effects on BuyersSubjective Product Evaluations," in Advances in Consumer Research, Vol. 14, Melanie Wallendorf and Paul Anderson, eds. Provo, UT: Association for Consumer Research, 193-97. , Dhruv Grewal, and Larry D. Compeau (1991), "TheConcept ofReference Prices: Theoretical Justifications and Research Issues," presented at theAssociation for Consumer Research Conference, Chicago (October).

References

and R. Krishnan(1985), "The Effect of Price onSubjective Product Evaluations," in Perceived Quality: How Consumers View Stores and Merchandise, Jacob Jacoby and Jerry C. Olson, eds. Lexington, MA: Lexington Books, 209-32. Nagle, Thomas T. and Reed K. Holden (1995), TheStrategy and

Tactics ofPricing, 2d ed. Englewoods Cliffs, NJ: Prentice Hall. Oliver, R. L. and J. E. Swan ( 1989), "Consumer Perceptions ofInterpersonal Equity and Satisfaction in Transactions: A Field Survey Approach," Journal ofMarketing, 53 (April), 21-35. Phillips, Lynn W., Dae R. Chang, and Robert D. Buzzell (1983), "Product Quality, Cost Position and Business Performance: A Test ofSome Key Hypotheses," Journal ofMarketing, 47 (Spring), 2643.

Rajendran, K. N. and Gerard J. Tellis ( 1994), "Contextual and Temporal Components ofReference Price," Journal ofMarketing, 58 (January), 22-34.

References

Rao. Akshay R. and Kent B. Monroe(1988), "TheModerating Effect ofPrior Knowledge onCue Utilization in Product Evaluations," Journal ofConsumer Research, IS (September), 253-64.

and (1989), "The Effect of Price, Brand Name, and Store Name on Buyers' Subjective Product Assessments: An Integrative Review," Journal ofMarketing Research, 26 (August), 351-57.

Schindler, Robert M. ( 1989), "TheExcitement ofGetting a Bargain: Some Hypotheses Concerning theOrigins and Effects ofSmartShopper Feelings," in Advances in Consumer Research, Vol. 16, Thomas K. Srull, ed. Provo, UT: Association for Consumer Research, 447-53.

Shapiro, Benson P. and Barbara B. Jackson ( 1978), "Industrial Pricing to Meet Customer Needs," Harvard Business Review, (November-December), 119-127.

, V. Kasturi Rangan, Rowland T. Moriarty, and Elliot B. Ross (1987), "Manage Customers for Profits (Not just Sales)," Harvard Business Review, 65 (September/October), 101-108.

References

Stigler, George J. (1961), "TheEconomics ofInformation," Journal ofPolitical Economy, 69 (June), 213-25. Szybillo, George J. and Jacob Jacoby (1974), "Intrinsic Versus Extrinsic Cues as Determinants ofPerceived Quality," Journal ofApplied Psychology, 59 (February), 74-78. Thaler, Richard (1985), "Mental Accounting and Consumer

Choice," Marketing Science, 4 (Summer) 199-214. Tucker, Ledyard R. and Charles Lewis (1973), "A Reliability Coefficient for Maximum Likelihood Factor Analysis," Psychometrika, 38 (1), 1-10.

Urbany, Joel E. and William O. Bearden (1989), "Reference Price Effects onPerceptions ofPerceived Offer Value, Normal Prices, and Transaction Utility," in Enhancing Knowledge Development in Marketing, Paul Bloom et al., eds. Chicago: American Marketing Association, 45-49.

and (1990), "The Effects ofAdvertised PriceInformation onValue Perceptions," unpublished manuscript, Department ofMarketing, University ofSouth Carolina.

, and Dan C. Weilbaker (1988), "The Effect ofPlausible and Exaggerated Reference Prices onConsumer Perceptions and PriceSearch," Journal ofConsumer Research, 15 (June), 95-110.

References

and Peter R. Dickson (1990), "Consumer Knowledge ofNormal Prices: An Exploratory Study and Framework," Working Paper Series, Report No. 90-112, Cambridge, MA: Marketing Science Institute.

White, J. Dennis and Elise L. Truly (1989), "Price-Quality Integration in Warranty Evaluation," Journal ofBusiness Research, 19 (September), 109-25.

Zeithaml, Valarie A. (1988), "Consumer Perceptions of Price, Quality, and Value: A Means-End Model and Synthesis ofEvidence," Journal ofMarketing, 52 (July), 2-22.

AuthorAffiliation

Dhruv Grewalis Associate Professor ofMarketing, Department ofMarketing, University ofMiami. Kent B. Monroeis J. M. Jones Professor ofMarketing, University ofIllinois. R. Krishnanis a professor, Department ofMarketing, California Polytechnic Institute and State University. This article has benefited from comments and suggestions ofJames Littlefield, Julie Ozanne, Edward Fern, Dennis Hinkle, Michael Levy, Arun Sharma, Howard Marmorstein, Diana Grewal, Carolyn Costley, Banwari Mittal, Tamara Mangleburg, and A. Parasuraman. Theauthors also acknowledge thevaluable feedback provided by thethree anonymous JM reviewers. Financial support from a Cunningham Fellowship, Marketing Science Institute, and University ofMiami Summer Research Grant is gratefully acknowledged.