Price placebo effect in hedonic consumption

Abstract

Given the widespread use of premium pricing strategies as a marketing practice, how consumers evaluate premium pricing actions is an interesting issue for both marketing researchers and practitioners. Thus, the objective of this study was to examine perceptions of premium prices and the role of prices, which act as a cue that improves consumers' experiences in an upscale cafe setting. Indeed, the results indicated that both price-quality schema and prestige sensitivity were significant factors that induce a positive overall perception of quality at luxury cafes, including coffee, service, and atmosphere. Thus, this study evidences that a price placebo effect exists in hedonic consumption settings. To better understand consumers' mental accounting based on their income source, the study examined the moderating effect of the origin of the respondents' income as well. The results revealed that the price tag generates positive consumer responses to cafe quality. (C) 2013 Elsevier Ltd. All rights reserved.