Academy of Marketing Studies Journal (Print ISSN: 1095-6298; Online ISSN: 1528-2678)


Sold! Threshold Pricing Effects in Online Negotiations

Author(s): Brian R. Kinard

Numerical boundaries are closely associated with round values (e.g., 10, 50, 100) and serve as psychological thresholds that influence price perceptions. For instance, prices set just-below a numerical boundary lower price perceptions and increase sales for a product due to the disparity consumers perceive with prices that cross below a psychological threshold. Although such effects are demonstrated in comparative retail pricing across a range of consumer product and services categories, no attention has been given to this effect in the context of online negotiations. While in-person verbal negotiations require consumers to rely heavily on memory- based processing of price information, side-by-side (stimulus-based) visual processing of information allows for an easier comparison of aligned attributes. This is of significant consequence, as online negotiations generally require the buyer to manually enter a price offer adjacent to the list price. Five studies, across four product categories, provide evidence for a threshold crossing effect in online price negotiations. Specifically, at or just-above threshold prices elicit significantly higher offers from buyers. These higher offers, if accepted by the seller, are shown to significantly elevate buyer satisfaction with the purchase. Further, the results indicate that higher initial offers lead to marginally higher counteroffers which can significantly increase the likelihood of a successful negotiation.

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