Effect of Extreme-Priced Products on Consumer Reservation Prices: An Example of Bicycle and SPA Services

Abstract

This study aimed to investigate how the presence of an extremely high-priced product in the catalogue could influence the reservation price. This study adopted an experimental study design, and recruited 1,200 office workers, who bought bicycles or received SPA services in the last three months. The main investigations of this study were how the reservation price of a target product was influenced by the degree of relatedness and contiguity, and the combined effects of relatedness and contiguity. The results showed higher feature similarity between extreme-priced products and target product, and the extreme-priced products had a greater influence on the reservation price of target. Furthermore, contiguity enhanced the relationship between feature similarity and reservation price. If the target product is tangible, higher contiguity between extreme-priced products and target product; and the greater influence of extreme-priced products on reservation price of a target product was noticed. In conclusion, our findings suggest that the way of presence of an extremely high-priced product could influence the customer's reservation price.