The Price Precision Effect: Evidence from Laboratory and Market Data
Presentation
Based on Marketing Science article The Price Precision Effect: Evidence from Laboratory and Market Data, Thomas, Simon and Kadiyali (2010)
Teaching Objective
The objective of this paper is to demonstrate that price framing can influence purchase decisions. The paper demonstrates how presenting a price as a precise number ($385,123) or a round number ($385,000) can influence magnitude judgments. The paper also illustrates how experiments are more useful in testing causality whereas secondary data analyses are more useful in testing external validity. The results offer a real-world example of how consumer insights can shape marketing decisions.
Keywords: Pricing, Framing, Experiments, Consumer Insights