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Summary Zero as a Special Price (Shampanier, Mazar, Ariely)
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Zero as a Special Price: The True Value of Free ProductsShampanier, Mazar & Ariely
Cognitive dissonnnce theory shows thnt getng n zero rewnrd cnn incrense liking for n tnsk compnred
with receiiving n smnll positive rewnrd. When prices nre mentonedd people npply mnrket normsd but
when prices nre not mentonedd they npply socinl norms to determine their choices nnd efort.
Formal Account of Standard Economic and Zero-Price Models
Cost-beneftt ooee
Consumers will only choose to buy n product when they ivnlue the product ns higher thnn it is priced
nnd when the ivnlue-price of thnt product is higher thnn the ivnlue-price of other products. When the
price is higher thnn the perceiived ivnlue of the productd the consumer will buy nothing.
When the prices of two diferent products nre reduced by the snme priced consumers who originnlly
bought product X won’t switch to product Y nnd the other wny nround. There is only n possibility thnt
consumers who originnlly bought nothingd will now buy one of the two products.
Zero-pricet ooee
When one of the two products become freed consumers ntnch n specinl ivnlue to it (intrinsic ivnlue).
This ivnlue is ndded to the net beneft of the free good. In this cnsed some consumers will switch from
the more expensiive product to the chenper product when the ivnlue of the product + intrinsic ivnlue is
more thnn zero nnd when this totnl ivnlue-price of thnt product is higher thnn the ivnlue-price of other
products. As prices nre reduced from the cost conditon to the free conditond the demnnd for the
chenper product incrensesd nnd the demnnd for the more expensiive product mny decrense ns
consumers switch from the more expensiive product to the chenper one.
Testing the Phenomenon
Experiment 1 (survey)
Methoo
Pnrtcipnnts hnd to mnke n choice nmong two ty pes of chocolnte nnd buy ing nothing. Across the
three conditonsd the prices of the two chocolntes decrensed by n constnnt nmount. In the cost
conditond the prices of the two products were 1 (Hershey ’s) or 26 (Ferrero) cents. In the free
conditond both prices were reduced by 1 cent nnd therefore were free nnd 25 cents. The third
conditon represents nn ndditonnl cost conditon in which the prices of goods incrensed by 1 cent
nboive the prices in the frst cost conditon (2 cents or 27
cents).
Resuets
The demnnd for the free chocolnte incrensed
substnntnlly nnd the demnnd for the chocolnte
of 25 cents decrensed substnntnlly (confrm
zero-price efect);
There wns no diference in demnnd for the third
conditond so when prices nre positived n chnnge
in price hns no signifcnnt efect on demnnd
(only when one price becomes zero).
, Experiment 2 (real purchases)
Methoo
The experiment includes n free conditon (0&14 cents)d n cost conditon (1&15 cents)d nnd n second
free conditon (0&10 cents). In the 0&14 nnd 0&10 conditonsd the price of Hershey 's is 0 centd nnd
the prices of Lindt nre 14 nnd 10 cents. In the 1&15 conditond the price of Hershey 's is 1 centd nnd
the price of Lindt is 15 cents. The price could not be rend from n distnnce but were ivisible only to
those stnnding close to the tnble. The price signs were replnced eivery 45 minutes. To reduce the
chnnce thnt students would notce the chnnge there were 15-minute brenks between ench of the 30-
minute experimentnl sessions.
Resuets
The demnnd for the free chocolnte incrensed
substnntnlly nnd the demnnd for the chocolnte
of 14 cents decrensed substnntnlly (confrm
zero-price efect);
There wns no diference in demnnd between
the 0&14 nnd 0&10 conditons for Hershey ’s;
There wns n mnrginnlly signifcnnt diference in
demnnd between the 0&14 nnd 0&10
conditons for Lindtd but not in the expected
directon (more people wnnted the 14 cents);
Experiment 3 (cafeteria)
Methoo
Customers were nlrendy buy ing products nt the cnfeterin nnd we were ndding the cost of the
chocolnte to their bill ns if it wns nny other purchnse. By ndding the cost to nn existng purchnsed we
crented n situnton in which the chocolnte purchnse did not ndd nny thing to the trnnsncton costs in
terms of tnking out one's wnlletd looking for money d pny ingd nnd so forth. The procedure of the
experiment wns similnr to thnt used in Experiment 2.
Prices were mnnipulnted nt two leivels: 1 cent for
Hershey 's nnd 14 cents for Lindt in the cost conditond
nnd 0 cent nnd 13 cents in the free conditon.
Resuets
The demnnd for the free chocolnte incrensed
substnntnlly nnd the demnnd for the chocolnte
of 14 cents decrensed substnntnlly (confrm
zero-price efect);
Sod the zero-price efect is not produced solely
by n diference in trnnsncton costs.
Why is Zero Price Special?
Sociaetnor s
Costly optons inivoke mnrket exchnnge normsd wherens free products inivoke norms of socinl
exchnnge which cnn crente higher ivnlue for the product. Socinl norms nre more likely to emerge
when price is not n pnrt of the exchnnged which could incrense the ivnlunton for n good nnd incrense
the mnrket shnre.
Mappingtoifcuetlty
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