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The double benefits of consumer certainty: combining risk and range effects

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Abstract

We investigate consumer certainty as an important dimension of attitude strength and explore its influence on willingness to pay (WTP) ranges. WTP ranges are defined by two thresholds (floor/minimum and ceiling/maximum reservation price); their difference indicates the degree of (un)certainty. Across five studies (online, laboratory, and field experiments plus a field survey) with more than 25,000 participants, we find that increased consumer certainty generates an asymmetric shift in the WTP thresholds, such that the floor price increases more strongly than the ceiling price, which also implies a reduction in the WTP range. Consequently, this research specifies predictions offered by choice models that use Bayesian learning. The asymmetric effects appear, irrespective of the source of uncertainty, so our study advances understanding of whether consumers differ in their behavior as a consequence of preference or product performance uncertainty.

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Notes

  1. In turn, previous empirical findings regarding the endowment effect actually might have reflected the average of a relatively stronger increase in the floor, relative to the ceiling, price.

  2. Previous research offers initial indications of this range-reducing effect of certainty, though without analyzing the impact on WTP thresholds separately. For example, Dost and Wilken (2012) approach the certainty–range link indirectly, showing that the WTP range for a high certainty-level commodity product is smaller than that for a low certainty-level service. Wang et al. (2007) demonstrate that performance and preference uncertainty can increase WTP ranges. Both contributions call for further empirical research on the effect of certainty on WTP ranges.

  3. All items formulated for this pretest, as well as statistical details, are available from the authors upon request.

  4. Items are available from the authors upon request.

  5. The items pertaining to the two latter constructs are available from the authors upon request.

  6. Items are available from the authors upon request.

  7. Parameter estimates derived from both reduced samples can be obtained from the authors upon request.

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Acknowledgments

Robert Wilken would like to thank the “Fondation Maison des Sciences de l’Homme,” as the revision of this manuscript was completed during his stay at Maison Suger, Paris/France, between October and December 2013.

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Correspondence to Robert Wilken.

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Maier, E., Wilken, R. & Dost, F. The double benefits of consumer certainty: combining risk and range effects. Mark Lett 26, 473–488 (2015). https://doi.org/10.1007/s11002-014-9282-5

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