Consumer normal price estimation: market versus personal standards

In reference-price models, internal reference price is typically estimated from actual market prices. Given the generally poor price knowledge consumers have exhibited in prior research, the question is whether it is reasonable to use actual market prices to estimate consumers' internal reference-price standards. The initial answer provided in this research, surprisingly, is yes. Although internal reference prices are measurable and do affect consumer price perception, the gains in measuring and using those standards in predicting brand choice for frequently purchased products may not be worth the costs. Reasons why the surrogate price measure may work and implications for the measurement of internal reference-price standards are considered.