A multimethod experimental investigation of the effect of market price knowledge on acceptable price range

This dissertation reports a multimethod investigation of the relationship between market price knowledge and the width of the acceptable price range. Psychophysics and Social judgment theory are discussed as supporting the existence of acceptable price thresholds (limits) and acceptable price range. Hypotheses stemming from Social judgment theory are offered directly relating market price knowledge with the width of the acceptable price range.

The relationship between market price knowledge and acceptable price range was investigated using two different methods, the Stoetzel and the Own-Category method. Unlike the previous acceptable price limit studies, this research assessed the reliability and construct validity of each of those methods.

The research design used was a laboratory experiment with a series of 2 x 2 factorials based on the Solomon 4 group-six study design. The dependent variables were: (1) the acceptable lower price limit, (2) the acceptable upper price limit, and (3) the acceptable price range. The independent variable was market price knowledge. The two-way anova design had two factors. The first factor had two levels: absence and presence of market price knowledge. The second factor consisted of two levels: pretest and no pretest treatments.

The research hypothesis was tested using (1) two-way analysis of variance, (2) analysis of covariance using sex and prior price knowledge as covariates, and (3) paired t-tests.

Test-retest reliability of the two methods were assessed using Pearson's correlation coefficient. Pearson correlation coefficients were also used to set validity coefficients. Those coefficients were used to assess construct validity of the two measures in terms of convergent and discriminant validity within the context of Campbell and Fiske's multitrait-multimethod zero-order correlation matrix.

In general, the experimental results partially confirmed the hypothesis that the acceptable price range would be narrower for subjects possessing market price knowledge than for those subjects possessing little or no market price knowledge. The results of the Stoetzel method supported the hypothesis, but the hypothesis was not supported when the same subjects used the OwnCa Category method.

The results did support the hypothesis that the two methods were valid measures of ac~eptable price thresholds with the OwnCa Category method producing higher reliability scores than the Stoetzel method. Results of the dissertation are discussed with respect to the major findings and significance to price theory and research. The dissertation concludes with a discussion of the study limitations and directions for future research.