Lecture 11 – PRICING PSYCHOLOGY

Question 1

When evaluating prices, consumers are affected by: (2)

Answer 1

1. inferences
2. reference prices

Question 2

Reference points in pricing

Answer 2

1. original price
2. expectations
3. prices of other products within the category
4. prices of other products outside the category

Question 3

why is there uncertainty in the applicability of prospect theory in this field? (3)

Answer 3

1. people may NOT follow value functions in expectations
2. actual payments may not be daily
3. peanut effect

Question 4

peanut effect

Answer 4

= payment of low sums may feel inconsequential

Question 5

4 pricing schemes

Answer 5

1. price discrimination
2. unlimited use
3. pay what you wish
4. freemium

Question 6

price discrimination

Answer 6

= charge specific groups of consumers in different ways

Question 7

unlimited use

Answer 7

= consumers pay a predetermined amount & can use the product as much as they want

Question 8

pay what you wish

Answer 8

= consumers decide whether to pay & how much

Question 9

why should consumers decide to pay in case of a “pay what you wish” price scheme? (3)

Answer 9

1. support the seller
2. don’t want to be seen badly
3. zero is a non-acceptable option

Question 10

freemium

Answer 10

= free option may include ads or miss certain features