| dc.description.abstract | This thesis aims to achieve new contributions and insight on how a precise price affects
consumer perception of both firms and products. The study is based on an experimental
survey, conducted through Prolific, Amazon MTurk, and Qualtrics, with financial support
from the Department of Accounting, Auditing and Law at NHH.
The experimental design is based on a belief that precise prices will affect consumers'
perception of costs, pricing procedures, and fairness. Our experiment is based on a
2x2 factorial design, with four different treatment groups. All treatments obtain some
information regarding a hypothetical firm, YourKitchen. Two groups are informed that
YourKitchen has a cost-focus. All participants are further asked to provide a cost estimate
for one of their products, which is priced at $20 or $20.17, depending on the treatment
group. This design allows us to analyze how participants perceive precise prices, both in
isolation, and in combination with a self-proclaimed cost-focus. Proceeding, participants
are asked to rate statements regarding the characteristics, pricing procedure and fairness
of the product. Ultimately, we assigned participants to one of two different groups, seeing
either a round or precise price, and ask them to provide a profit estimate.
The results show that precise prices increase cost estimates, and this effect is statistically
significant. This was expected, as former research show similar results. However, this
effect is diminished when combined with a proclaimed cost-focus. This is contradictory
to our hypothesis of positive synergies between the two manipulations. Interestingly, we
found that both precise pricing and a self-proclaimed cost-focus, when seen in isolation,
seem to have an almost identical effect on the cost estimates.
Prior research on the price precision effect have not investigated whether this effect is
more than just a simple anchoring effect. Interestingly, we believe that the combination of
the results from the cost and profit estimation questions indicate that the price precision
effect is not solely an anchor effect.
Moreover, the majority of our participants seem to believe that precise pricing signals
cost-based pricing. However, in contrast with our hypothesis and prior research, there is
no data from our study suggesting that this increased perceived fairness. We discuss that
this may be due to the asymmetric informational relationship. | en_US |
