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Paper by Tatiana Sokolova accepted in Journal of Marketing Research

Published: 19th June 2020 Last updated: 19th June 2020

Tatiana Sokolova her paper “The Left-Digit Bias: When and Why Are Consumers Penny Wise and Pound Foolish?”, co-authored with Satheesh Seenivasan (Monash University, Australia) and Manoj Thomas (Cornell University, USA) has been accepted for publication in the Journal of Marketing Research.

Abastract

Consumers’ price evaluations are influenced by the left-digit bias, wherein consumers judge the difference between $4.00 and $2.99 to be larger than that between $4.01 and $3.00, even though the numeric differences are identical. This research examines when and why consumers are more likely to fall prey to the left-digit bias. The authors propose that the left-digit bias is stronger in stimulus-based price evaluations, wherein people see the focal price and the reference price side by side, and weaker in memory-based price evaluations, wherein people have to retrieve at least one price from memory. This is because in stimulus-based price evaluations, people tend to rely on perceptual representations of prices without rounding them. In memory-based price evaluations, they rely more on conceptual representations, which makes them more likely to round the prices. Results from six studies—five experiments and a scanner panel study—support the hypothesis that the left-digit bias is stronger in stimulus-based evaluations. These results inform managers about when to use left-digit pricing and characterize fundamental differences between stimulus-based and memory-based evaluations.