Purpose – To investigate the theoretical foundations of price as a multi-dimensional component of value and to examine the nature of the relationship between price-attribute perception and overall price evaluation. Design/methodology/approach – The economic theory of the distribution of surplus across customers and the equity theory are used to develop the hypotheses about the multi-dimensional nature of the price construct. Prospect theory is used to predict the relationship between price-attribute performance and overall price evaluation. Data were collected through a structured questionnaire regarding mobile communications operators in Italy. After carrying out a principal factor analysis, several regression models were run to test the hypotheses. Findings – The results confirm that price is a multi-dimensional construct (i.e. made up of cheapness, fairness and variety), yet they do not fully support the prospect theory predictions. Research limitations/implications – Multi-item price measurement scales need to be further developed and validated. The theoretical framework needs to be further validated in other industries to assess the external validity of these findings. Practical implications – Different dimensions of price represent different “evaluation categories”, all related to importance, yet vastly different in how one ought to respond to each of them. For price dimensions showing an asymmetric relationship with overall price evaluation, relative importance is a function of performance. Originality/value – This paper extends the price conceptualization from a uni-dimensional to a multi-dimensional construct and suggests an integration of prospect theory. It offers a contribution for research on evaluation measurement procedures as well as on price and value management.
The Asymmetric Impact of Price-Attribute Performance on Overall Price Evaluation
PADULA, GIOVANNA;BUSACCA, BRUNO GIUSEPPE
2005
Abstract
Purpose – To investigate the theoretical foundations of price as a multi-dimensional component of value and to examine the nature of the relationship between price-attribute perception and overall price evaluation. Design/methodology/approach – The economic theory of the distribution of surplus across customers and the equity theory are used to develop the hypotheses about the multi-dimensional nature of the price construct. Prospect theory is used to predict the relationship between price-attribute performance and overall price evaluation. Data were collected through a structured questionnaire regarding mobile communications operators in Italy. After carrying out a principal factor analysis, several regression models were run to test the hypotheses. Findings – The results confirm that price is a multi-dimensional construct (i.e. made up of cheapness, fairness and variety), yet they do not fully support the prospect theory predictions. Research limitations/implications – Multi-item price measurement scales need to be further developed and validated. The theoretical framework needs to be further validated in other industries to assess the external validity of these findings. Practical implications – Different dimensions of price represent different “evaluation categories”, all related to importance, yet vastly different in how one ought to respond to each of them. For price dimensions showing an asymmetric relationship with overall price evaluation, relative importance is a function of performance. Originality/value – This paper extends the price conceptualization from a uni-dimensional to a multi-dimensional construct and suggests an integration of prospect theory. It offers a contribution for research on evaluation measurement procedures as well as on price and value management.
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