Putting a Price on User Innovation: How Consumer Participation Can Decrease Perceived Price Fairness

Abstract

Consumer participation allows firms and consumers to innovate through the joint creation of products—a rapidly growing and dramatic shift in the way consumers acquire products in the marketplace. Building on past consumer participation and behavioral pricing research, we investigate how consumer participation affects price perceptions and the process by which these perceptions form. While past research suggests consumer participation increases price perceptions, we argue it decreases price perceptions when participation costs are salient. Across four studies, we show that participation costs are not always salient prior to purchase (e.g., when psychological distance and self-efficacy are high) but that managerial interventions intended to support consumer participation—including advertising, product trial, and product support—can inadvertently backfire by making participation costs salient and reducing price perceptions for participation-based products. Thus, we provide evidence of a potential drawback of consumer participation, which has pricing and competition implications.