The influence of outcome messages on reference prices

Abstract

This experiment investigated ways in which expected or reference price for a public leisure service might be altered. Two hundred twenty‐four subjects were randomly assigned to one of six treatment groups. Each subject received a message communicating potential outcomes associated with paying fees for a hypothetical aerobics program. Subsequent changes in reference prices were monitored. Subjects were particularly responsive to the message suggesting that other participants would suffer if the subjects failed to generate sufficient revenues from fees to meet their own program costs. The mean reference price reported by this group was 41 % greater than that reported by the control group. The message that focused on personal benefit arising from payment of fees also significantly elevated reference price levels. The lowest prices were reported by those who received only program information (the control group) and those who were told that they might lose access to hypothetical program opportunities. Level of psychological involvement was used as a covariate and was found to influence subjects’ price expectations, current activity patterns, and intent to enroll in future aerobics programs.

Keywords:

• experiment
• prospect theory
• public sector
• recreation programs
• reference price