The left-digit bias: When and why are consumers penny wise and pound foolish?

Tatiana Sokolova, Satheesh Seenivasan, Manoj Thomas

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Consumers’ price evaluations are influenced by the left-digit bias, wherein consumers judge the difference between $4.00 and $2.99 to be larger than that between $4.01 and $3.00, even though the numeric differences are identical. This research examines when and why consumers are more likely to fall prey to the left-digit bias. The authors propose that the left-digit bias is stronger in stimulus-based price evaluations, wherein people see the focal price and the reference price side by side, and weaker in memory-based price evaluations, wherein people have to retrieve at least one price from memory. This is because in stimulus-based price evaluations, people tend to rely on perceptual representations of prices without rounding them. In memory-based price evaluations, they rely more on conceptual representations, which makes them more likely to round the prices. Results from six studies—five experiments and a scanner panel study—support the hypothesis that the left-digit bias is stronger in stimulus-based evaluations. These results inform managers about when to use left-digit pricing and characterize fundamental differences between stimulus-based and memory-based evaluations.
Original languageEnglish
Pages (from-to)771-788
JournalJournal of Marketing Research
Volume57
Issue number4
Early online dateJun 2020
DOIs
Publication statusPublished - Aug 2020

Keywords

  • left-digit bias
  • memory-based evaluations
  • numerical cognition
  • price evaluations
  • reference prices

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