| Abstract: |
The process of consumer decision-making is multidimensional, and price
perception is a very important but still not well-understood dimension for
both marketers and consumers. Although heuristics or mental shortcuts are seen
as biased and can cause decision errors, consumers tend to use price knowledge
heuristics for purchase decisions, sometimes relying on old information. This
study examined the effects of individual attitudinal and demographic factors
on the ability of 351 respondents to correctly guess the prices of 13 products
and services using ANOVA and the development of a seven-factor price
perception model using latent variable analysis. While most respondents
preferred to either research prices first or compare prices to a similar
product, they either systematically underestimated or overestimated the prices
of the products. In the ANOVA, brand loyalty, importance of substitute
products and knockoff products, how financially well-off the respondent
household was growing up, product quality importance, haggling tendency, and
level of income were statistically significant predictors of price perception
error. Latent variable analysis revealed that demographics, decision making,
and price sensitivity factors had the greatest influence on price perception
error. Level of education and income, frequency of regret, coupon importance,
and how respondents chose to save or spend money were significant latent
variables. |