Department of Marketing & Entrepreneurship

Consumer payments elicited on slider scales can be systematically different from those elicited through text boxes because of the endpoint assimilation effect. When people use text boxes to make payments, they evaluate monetary values relative to the starting point of the response range. In contrast, when people use slider scales, they evaluate monetary values relative to the starting point as well as the endpoint of the response range. Consequently, payments elicited on slider scales tend to be assimilated towards the endpoint of the response range. This slider scale endpoint assimilation effect varies for ascending and descending payment formats. For ascending payment formats (e.g., eBay bids), slider scales elicit higher payments than text boxes. But for descending payment formats (e.g., Priceline bids), slider scales elicit lower payments than text boxes. This research not only documents how slider scales alter consumer payments, but it also explains how the mental number line affects financial decisions.

A consumer’s decision to engage in search depends on the beliefs the consumer has about an unknown product characteristic such as price. In this paper, we elicit the distribution of price beliefs and explicitly study their role in a consumer’s decision to search. We design an incentive-aligned online study where subjects search over the price of a homogeneous good, and provide prior price beliefs and updated beliefs after each search. Based on data collected from a nationally representative panel, we find substantial heterogeneity in prior price beliefs which is at odds with the rational expectations assumption. We explore the importance of accounting for price beliefs in two ways - first, we study the impact of assuming rational expectations on estimates of search costs. For both simultaneous and sequential search models, assuming rational expectations biases the search cost estimates the direction of bias depends on the subject’s prior beliefs. Importantly, while accounting for expected price beliefs is crucial to consistently estimating search costs, assuming that the standard deviation of the subject’s beliefs coincides with the true price distribution does not substantially bias the distribution of search cost. Second, we explore the importance of price beliefs in inferring how consumers search. Assuming rational expectations, we find that subjects engage in simultaneous search which is consistent with previous research. However, the decision to engage in an additional search depends on the updated price beliefs pointing to sequential search. We discuss the managerial relevance of these results and the implications for researchers.