The Effect of Explicit Reference Points on Consumer Choice and Online Bidding Behavior

The Effect of Explicit Reference Points on Consumer Choice and Online Bidding Behavior

By Itamar Simonson, Utpal Dholakia
2003Working Paper No. 1823

Providing explicit instructions to compare one option to other (reference) options is one of the most basic and commonly used promotional and persuasion tactics. Building on prior research on persuasion knowledge and the impact of suspicion, we propose that the mere fact that consumers are explicitly encouraged to make particular comparisons induces more cautious and careful purchase and bidding behavior. This proposition was supported in a field experiment using online auctions, in which comparisons among listings were either done spontaneously by bidders or were encouraged using an explicit instruction to compare the focal with adjacent listings. A follow-up laboratory experiment provided evidence that a seller who explicitly suggests reference points is perceived as less trustworthy. A third study extended these findings to consumer choice, showing that explicit instructions to compare increase the tendency to make cautious choices (e.g., choose compromise, low risk, and average options). We discuss the theoretical and practical implications of this research.