Image effects and rational inattention in internet-based selling

Dongwon Lee, Robert Kauffman, Mark Bergen

Research output: Contribution to journalArticlepeer-review

8 Scopus citations

Abstract

The frequency of occurrence of certain price points in Internet-based selling is investigated in order to determine what drives the observed regularities and variations. Theories based on consumer perceptions of price and quality images, and on rational inattention to price-endings are explored by specifying and testing empirical models for price-endings using more than 1.5 million daily observations on multiple product categories sold by 90 Internet-based retailers collected over a two-year period. The results show that a firm's on-line reputation and relative price levels affect the price-endings chosen in different product categories, and that 9-ending prices increase consumer purchases. These findings support an image theory of store quality and price. The use of 9-ending prices varies across Internet selling formats in a way consistent with differences in the rational attentiveness these channels engender in consumers. This research on the role of information technology in price-setting provides insights for marketers who wish to optimize price-setting decisions in the competitive environment of Internet retailing.

Original languageEnglish (US)
Pages (from-to)127-166
Number of pages40
JournalInternational Journal of Electronic Commerce
Volume13
Issue number4
DOIs
StatePublished - Jul 1 2009

Bibliographical note

Funding Information:
The authors contributed equally to this research. An earlier version of this paper was presented at the 9th INFORMS Conference on Information Systems and Technology, and portions of it were subsequently presented at the University of Minnesota, Arizona State University, Michigan State University, University of Texas Pan American, Korea University, and National Sun Yat-Sen University, as well as at the doctoral consortium of the 2005 American Conference on Information Systems. The authors thank the editor-in-chief and the anonymous reviewers at the International Journal of Electronic Commerce for their useful input and suggestions. The authors thank the anonymous reviewers for CIST 2004, as well as the co-chairs, Chris Forman, Hemant Bhargava, and D.J. Wu, for their helpful input on an earlier version of this paper. We further appreciated the comments of Barrie Nault, Sri Narasimhan, Rahul Telang, and Sunil Mithas for their helpful suggestions. The authors also thank Daniel Levy, Allan Chen, and Fred Riggins for their helpful comments on related work and their encouragement. Dongwon Lee’s work was supported by a Research Grant from Korea University and a Doctoral Support Award from the e-Business Research Center of Penn State University. Rob Kauffman’s work was supported in part by the MIS Research Center, the Center for Advancing Business Through Information Technology, and the W. P. Carey Chair in Information Systems at Arizona State University. All errors of fact and interpretation are the solely the authors’ responsibility.

Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.

Keywords

  • 9-ending prices
  • Image effects
  • Internet-based selling
  • Price points
  • Rational inattention
  • Strategic pricing
  • Technology impact

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