Starting from $500! A Behavioral Examination of Advertising with Lower Price Bounds

Abstract

Advertisements often highlight the lowest possible price that buyers can expect to pay: United Airlines offers flights to Canada “from $230”. Upper price bounds, however, are rarely observed. From a rational viewpoint, lower price bounds could affect the buyer’s expectations negatively, as they exclude the range of attractive hypothetical prices in the lower range of the price distribution. So, there are reasons to expect lower price bounds to be less persuasive to the buyer than upper price bounds, or even no price information. We find evidence of a strong consumer preference for lower price bounds over upper bounds. Results reveal that upper price bounds suggest high prices, while lower price bounds suggest a three-fold pattern of expected prices: For some consumers, lower price bounds are uninformative; for others, they suggest low prices; and for others, they suggest high prices.