Reference Points Beyond Price — Fairness Effects in Customer Choices

Abstract

Reference price effects are well established in the extensive body of reference price research and are an important element in modeling customers’ choices (cf. Briesch, Krishnamurthi, Mazumdar, and Raj, 1997; Kalyanaram and Winer, 1995; Putler, 1992; Rajendran and Tellis, 1994; Winer, 1989). The related area of perceived price fairness incorporates concepts from the fairness and justice literature (cf. Baumol, 1982; Konow, 2003) to examine the determinants of reference prices and how they impact on customers’ fairness judgments. Despite widespread recognition of the importance of reference-dependent effects related to price, reference-dependency has not been extended to other product and service attributes. As reference-dependent preference theories (Kahneman and Tversky, 1979; Sugden, 2003; Tversky and Kahneman, 1991), adaptation level theory (Helson, 1948), and the literature on asymmetric customer satisfaction judgment (Mittal, William, and Baldasare, 1998) propose that human perception in general occurs relative to a reference point of neutral response, we extend the concept of reference price research and price fairness to a range of product attributes other than price.