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Do Consumers’ Reference Points Affect Their Buying Decisions?
The reference point hypothesis is mute about whether a respondent explicitly makes the choice of the frame based on the reference point. Indeed, previous studies have only examined whether frame choice is consistent with the prediction of the reference point hypothesis. Thus, the empirical question of whether people explicitly make frame choices based on the reference point remains unanswered. According to these considerations, we examined whether people explicitly make frame choices based on the reference point.
The task, materials, and procedure were basically the same as in Experiment 2 with the exception of the stimuli in the priming task. Participants were presented with one of the pictures in which the color of the liquid differed from that in the frame choice task . By presenting a picture with liquid of a different color, we excluded the possibility that participants would regard the prime as equivalent to the glass for the frame choice task. Proportions of frame choice reasons for which participants stated a reference point. The behavioral model of prospect theory is used to represent how people manage risk and uncertainty when choosing between different options. We predicted that the reference point presented in the priming task would affect subsequent frame choice.
Recently, Puto proposed a conceptual framework for reference point formation, which he then demonstrated in the context of an industrial buying decision. The operationalizations Puto used in testing his framework are necessarily specific to industrial buyers; however, the conceptual framework is sufficiently general to extent to consumer buying situations. At the time of the decision, the decision maker evaluates the alternatives based on the current (i.e., the final) reference point and renders his/her choice. The reference point determines the decision frame which, in turn, governs the choice. Thus, a reference point which permits the outcomes to be framed as gains will tend to promote risk averse choice behavior, and a reference point which permits the outcomes to be framed as losses will tend to promote risk taking choice behavior.
In their EXPERIMENT 1, McKenzie and Nelson found that English speakers tended to prefer “full” frame to “empty” frame (72% vs. 28%). However, in the present study (i.e., with Japanese speaker participants), participants preferred the “empty” frame in general (45% for “full” frame vs. 55% for “empty” frame in the four experiments). At this point, we do not have any hypotheses about this language difference. Although the general preference for “full” or “empty” may vary across languages, it is noteworthy that the reference point hypothesis, which was originally proposed based on English speakers’ habits , has been repeatedly corroborated by experiments in Japanese.
In this instance, it appears that the manufacturer’s suggested retail price functions as an upper bound on the initial reference point for consumers, but factors affecting the lower limit remain to be determined. It seems that, in complex narratives, individuals assess their own probabilities, regardless of whether they are told the probability is “a chance” or “50-50”. This finding suggests that Thaler’s deterministic approach in applying prospect theory to consumer choice may be the appropriate route to follow. At this point we can only say that additional research into consumers’ abilities to teal with probabilistic descriptions of uncertainty is warranted. From the standpoint of using prospect theory to understand consumers’ judgment and choice processes, these results are mixed.
This price may become a reference point for those who would like to order a car. Fisheries management is not synonymous with the attainment of a single reference point. Select the points that should be used when calculating the reference position. The reference position is calculated as the average position of the selected points. You’re juggling classes, work, family, friends and faith, but the deadline for completing your paper is looming.