TAILIEUCHUNG - Zero as a Special Price: The True Value of Free Products

Inspired by the work of Dubois and Laurent (1994), Leibenstein (1950), Mason (1992), Kapferer (1998), Eastman et al. (1999) Phau and Prendergast (2000), and Dubois et al. (2001) on the evaluation of luxury brands, Vigneron and Johnson (2004) developed a framework of ‗brand luxury index‘ proposing that the luxury-seeking consumer‘s decision-making process can be explained by five main factors that form a semantic network. Including personal perceptions (perceived extended self, perceived hedonism), as well as the more usual non-personal perceptions (perceived conspicuousness, perceived uniqueness, perceived quality), Vigneron and Johnson reviewed the latent structure of and the interrelations among. | Marketing Science Vol. 26 No. 6 November-December 2007 pp. 742-757 ISSN 0732-2399 IEISSN1526-548X1071260610742 info rms I DOI 2007 INFORMS INFORMS holds copyright to this article and distributed this copy as a courtesy to the author s . Additional information including rights and permission policies is available at http . Zero as a Special Price The True Value of Free Products Kristina Shampanier Massachusetts Institute of Technology 38 Memorial Drive E56-311 Cambridge Massachusetts 02142 kshampan@ Nina Mazar Joseph L. Rotman School of Management University of Toronto 105 St. George Street Toronto Ontario M5S 3E6 Canada Dan Ariely Duke University One Towerview Road Durham North Carolina 27708 dandan@ When faced with a choice of selecting one of several available products or possibly buying nothing according to standard theoretical perspectives people will choose the option with the highest cost-benefit difference. However we propose that decisions about free zero price products differ in that people do not simply subtract costs from benefits but instead they perceive the benefits associated with free products as higher. We test this proposal by contrasting demand for two products across conditions that maintain the price difference between the goods but vary the prices such that the cheaper good in the set is priced at either a low positive or zero price. In contrast with a standard cost-benefit perspective in the zero-price condition dramatically more participants choose the cheaper option whereas dramatically fewer participants choose the more expensive option. Thus people appear to act as if zero pricing of a good not only decreases its cost but also adds to its benefits. After documenting this basic effect we propose and test several psychological antecedents of the effect including social norms mapping difficulty and affect. Affect emerges as the most likely account for the .

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