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Article
Publication date: 24 February 2012

Rajesh Chandrashekaran

The purpose of this article is to investigate whether involved consumers utilize the same set of reference prices to evaluate an offer as compared to those who are less…

Abstract

Purpose

The purpose of this article is to investigate whether involved consumers utilize the same set of reference prices to evaluate an offer as compared to those who are less involved. Additionally, this study aims to investigate whether the processes employed in the two groups are different.

Design/methodology/approach

A total of 200 students were enrolled to participate in a realistic shopping experience over a two‐week period. In the course of the study, subjects were asked to provide information on their reference prices. They were also asked to evaluate an advertised offer for a pair of jeans. The data were analyzed using a structural equations methodology.

Findings

Under high involvement, consumers utilize perceived normal price, an external market‐based reference price, to adjust their internal standards, which in turn is used to evaluate retail price. In contrast, low‐involvement consumers do not use their internal standards. Rather, they evaluate retail prices directly against external market‐based references.

Originality/value

Despite decades of research on the role of reference prices, the moderating role of involvement on reference price utilization has not been researched adequately. The findings reported here add to existing knowledge in the field and shed additional light on the process by which consumers evaluate posted prices. The findings also emphasize the need to segment the market on the basis of reference price utilization and to design appropriate communication strategies for each.

Details

Journal of Product & Brand Management, vol. 21 no. 1
Type: Research Article
ISSN: 1061-0421

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Article
Publication date: 1 June 2000

Rajiv Vaidyanathan, Praveen Aggarwal, Donald E. Stem, Darrel D. Muehling and U.N. Umesh

While there has been much debate in the reference pricing literature on the most appropriate conceptualization of internal reference price used by consumers in evaluating…

Abstract

While there has been much debate in the reference pricing literature on the most appropriate conceptualization of internal reference price used by consumers in evaluating deals, the question of whether consumers may use different internal reference prices at different stages of the purchase process has not been addressed. In this article, we hypothesize that consumers may use one type of internal reference price to form their deal attitude and another to determine their purchase intentions. We also show that different dimensions of internal reference price are used to determine deal attitude and purchase intention and that price uncertainty moderates the relationship between these internal reference prices and deal evaluation.

Details

Journal of Product & Brand Management, vol. 9 no. 3
Type: Research Article
ISSN: 1061-0421

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Article
Publication date: 24 April 2007

Ben Lowe and Frank Alpert

The purpose of this paper is to provide guidance within the reference price literature by investigating which is the best measure of reference price for the, as yet…

Abstract

Purpose

The purpose of this paper is to provide guidance within the reference price literature by investigating which is the best measure of reference price for the, as yet, unstudied context of new product categories. The paper also intends to examine another reference price issue for the new product category context: whether greater price uncertainty in this context makes it worthwhile to measure consumer confidence in reference price perceptions.

Design/methodology/approach

This research uses the experimental method to determine which measures of reference price are best suited to the new product context, by removing all other confounding influences.

Findings

The findings confirm that consumers tend to evoke the fair price concept for new product categories and the expected price concept for existing categories. The paper also finds that confidence in reference price measures, while theoretically useful, does not add to the understanding of reference price effects in new product categories, probably because respondents tended to be overly confident in their perceptions, despite lacking in more objective measures of product category knowledge.

Originality/value

Several studies in the literature have commented on the issue of fragmented measurement in the reference price domain. Some studies have offered theoretical guidance on measures to use. This is the first study to provide empirically tested theory on which measures to use and is the first study to examine reference price effects in new product categories including testing the usefulness of the confidence measure.

Details

Journal of Product & Brand Management, vol. 16 no. 2
Type: Research Article
ISSN: 1061-0421

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Article
Publication date: 1 March 2006

Glenn Boyle, Stefan Clyne and Helen Roberts

From 2007, New Zealand firms must report the cost of granting employee stock options (ESOs). Market‐based option pricing models assume that option holders are…

Abstract

From 2007, New Zealand firms must report the cost of granting employee stock options (ESOs). Market‐based option pricing models assume that option holders are unconstrained in their portfolio choices and thus are indifferent to the specific risk of any firm. By contrast, ESO holders are frequently required to hold portfolios that are over‐exposed to the firm that employs them and so adopt exercise policies that reflect their individual risk preferences. Applying the model of Ingersoll (2006) to hypothetical ESOs, we show that ESO cost can be extremely sensitive to employee characteristics of risk aversion and under‐diversification. This result casts doubt on the usefulness of any market‐based model for pricing ESOs, since such models, by definition, produce option values that are independent of employee characteristics. By limiting employee discretion over the choice of exercise date, vesting restrictions help reduce the magnitude of this problem.

Details

Pacific Accounting Review, vol. 18 no. 1
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 31 October 2008

Hans Pechtl

The purpose of this paper is to conceptualize several dimensions of product‐price knowledge and to develop measurement variables that qualify a person's product‐price

Abstract

Purpose

The purpose of this paper is to conceptualize several dimensions of product‐price knowledge and to develop measurement variables that qualify a person's product‐price knowledge. Assuming product‐price knowledge is a multidimensional construct, the relationship between its dimensions is to be investigated and consumer characteristics are to be analyzed according to whether they influence these dimensions.

Design/methodology/approach

Drawing on existing research, the paper theoretically develops a framework that proposes a taxonomy of product‐price knowledge and leads to a road map to identify determinants that probably affect a person's product‐price knowledge. Applying data on 319 shoppers, a path model simultaneously estimates the internal structure of the specified dimensions of product‐price knowledge, and determines the influence of the selected consumer characteristics on product‐price knowledge.

Findings

The proposed taxonomy sees product‐price knowledge as encompassing not just isomorphic prices, i.e. actually or formerly perceived and recalled prices. Rather, inferential prices, such as the normal price, or the upper reservation price for a product, as well as knowledge about price‐setting conditions and confidence in memorized prices, comprise important elements of a person's product‐price knowledge. As a result, there are several measurement variables to qualify a person's product‐price knowledge. The empirical results identify price mavenism, price consciousness, the use of a shopping list, and shopping frequency, as determinants of the accuracy and size of, and confidence in, one's product‐price knowledge, even though the impact structure is not uniform. There are some indications that formerly encountered price stimuli represent a relatively obsolete part of a consumer's product‐price knowledge.

Research limitations/implications

Research on product‐price knowledge should not be restricted to measuring the accuracy of recalled paid prices. Size of product‐price knowledge, and confidence in one's price knowledge, are identified as measures that are at least equally important to qualify a person's product‐price knowledge as accuracy. Furthermore, size and confidence are also additional dependent variables in analyzing determinants of consumers' product‐price knowledge. This is important for researchers and practitioners.

Originality/value

The proposed taxonomy and the empirical results lead to finer grained understanding of product‐price knowledge as a multi‐dimensional construct and its determinants.

Details

Journal of Product & Brand Management, vol. 17 no. 7
Type: Research Article
ISSN: 1061-0421

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Book part
Publication date: 23 November 2015

Anand Goel and Sumon Mazumdar

In fraudulent conveyance cases, plaintiffs allege that by entering into a complex leverage transaction, such as an LBO, a firm’s former owners ensured its subsequent…

Abstract

Purpose

In fraudulent conveyance cases, plaintiffs allege that by entering into a complex leverage transaction, such as an LBO, a firm’s former owners ensured its subsequent collapse. Proving that the transaction rendered the firm insolvent may allow debtors (or their proxies) to claw back transfers made to former shareholders and others as part of the transaction.

Courts have recently questioned the robustness of the solvency evidence traditionally provided in such cases, claiming that traditional expert analyses (e.g., a discounted flow analysis) may suffer from hindsight (and other forms of) bias, and thus not reflect an accurate view of the firm’s insolvency prospects at the time of the challenged transfers. To address the issue, courts have recently suggested that experts should consider market evidence, such as the firm’s stock, bond, or credit default swap prices at the time of the challenged transaction. We review market-evidence-based approaches for determination of solvency in fraudulent conveyance cases.

Methodology/approach

We compare different methods of solvency determination that rely on market data. We discuss the pros and cons of these methods and illustrate the use of credit default swap spreads with a numerical example. Finally, we highlight the limitations of these methods.

Findings

If securities trade in efficient markets in which security prices quickly impound all available information, then such security prices provide an objective assessment of investors’ views of the firm’s future insolvency prospects at the time of challenged transfer, given contemporaneously available information. As we explain, using market data to analyze fraudulent conveyance claims or assess a firm’s solvency prospects is not as straightforward as some courts argue. To do so, an expert must first pick a particular credit risk model from a host of choices which links the market evidence (or security price) to the likelihood of future default. Then, to implement his chosen model, the expert must estimate various parameter input values at the time of the alleged fraudulent transfer. In this connection, it is important to note that each credit risk model rests on particular assumptions, and there are typically several ways in which a model’s key parameters may be empirically estimated. Such choices critically affect any conclusion about a firm’s future default prospects as of the date of an alleged fraudulent conveyance.

Practical implications

Simply using market evidence does not necessarily eliminate the question of bias in any analysis. The reliability of a plaintiff’s claims regarding fraudulent conveyance will depend on the reasonableness of the analysis used to tie the observed market evidence at the time of the alleged fraudulent transfer to default prospects of the firm.

Originality/value

There is a large body of literature in financial economics that examines the relationship between market data and the prospects of a firm’s future default. However, there is surprisingly little research tying that literature to the analysis of fraudulent conveyance claims. Our paper, in part, attempts to do so. We show that while market-based methods use the information contained in market prices, this information must be supplemented with assumptions and the conclusions of these methods critically depend on the assumption made.

Details

Economic and Legal Issues in Competition, Intellectual Property, Bankruptcy, and the Cost of Raising Children
Type: Book
ISBN: 978-1-78560-562-8

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Book part
Publication date: 14 December 2016

Osamuyimen Enabulele, Mahdi Zahraa and Franklin N. Ngwu

This chapter examines the UK and the Nigerian approach to reducing emission of greenhouse gases (GHGs) into the environment as a result of gas flaring utilising the…

Abstract

Purpose

This chapter examines the UK and the Nigerian approach to reducing emission of greenhouse gases (GHGs) into the environment as a result of gas flaring utilising the market-based regulation. Determining how different jurisdictions fare in the quest to reduce GHG emissions associated with the oil and gas industry is essential because: policy makers have realised the advantages of market-based regulation over the command-and-control regulation; and in the light of various pledges different countries have made in different forum to reduce the emission of GHGs, particularly in the wake of the recently held Paris climate change conference.

Design/methodology/approach

Library-based approach is used, providing conceptual and theoretical understanding of climate change, GHG emissions and various market-based regulatory tools utilised in the United Kingdom and Nigeria in regulating emission associated with operations in the oil and gas industry.

Findings

The study reveals the significance of environmental regulations that encourage region integration and flexibility in the implementation of environmental policies. Moreover, it finds that the Paris Agreement re-affirms the utilisation of market-based regulations and indicates a future for investment in the oil and gas industry.

Practical implications

The study revealed that there are lacunas in regulations and strategies for the implementation of environmental regulations which need to be addressed in order to achieve zero or a significant decrease in gas flaring.

Originality/value

This study provided an ample opportunity to theoretically examine market-based regulatory tools utilised in the oil and gas industry in a developed country in relation to a developing country.

Details

Climate Change and the 2030 Corporate Agenda for Sustainable Development
Type: Book
ISBN: 978-1-78635-819-6

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Article
Publication date: 21 March 2016

Michael Jacobs Jr, Ahmet K. Karagozoglu and Dina Naples Layish

This research aims to model the relationship between the credit risk signals in the credit default swap (CDS) market and agency credit ratings, and determines the factors…

Abstract

Purpose

This research aims to model the relationship between the credit risk signals in the credit default swap (CDS) market and agency credit ratings, and determines the factors that help explain the variation in such signals.

Design/methodology/approach

A comprehensive analysis of the differences in the relative credit risk assessments of CDS-based risk signals and agency ratings is provided. It is shown that the divergence between credit risk signals in the CDS market and agency ratings is explained by factors which the rating agencies may consider differently than credit market participants.

Findings

The results suggest that agency credit ratings of relative riskiness of a reference entity do not always correspond with assessments by CDS spreads, as the price of risk is a function of additional macro and micro factors that can be explained using statistical analysis.

Originality/value

This research is unique in modeling the relationship between the credit risk assessments of the CDS market and the agency ratings, which to the best of the authors' knowledge has not been analyzed before in terms of their agreement and the level of discrepancy between them. This model can be used by investors in debt instruments that are not explicitly CDSs or which have illiquid CDS contracts, to replicate market-based, point-in-time credit risk signals. Based on both market-based and firm-specific factors in this model, the results can be used to augment through-the-cycle credit risk assessments, analyze issues surrounding the pricing of CDSs and examine the policies of credit rating agencies.

Details

The Journal of Risk Finance, vol. 17 no. 2
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 1 March 1973

R. Hamsin and F.M. Wilkes

Looks at the pricing policy of the Jaguar XJ12 which is primarily cost based. Demonstrates the importance of having an organizational structure capable of supplying…

Abstract

Looks at the pricing policy of the Jaguar XJ12 which is primarily cost based. Demonstrates the importance of having an organizational structure capable of supplying relevant information for market based pricing methods. Identifies factors which play an important part in the pricing strategy for Jaguar. Analyses the market‐based policy and cost‐based policy, stating that a market‐based policy and cost‐based policy, stating that a market‐based policy is more appropriate in that it provides: greater profits; satisfied customers; and a reduction in the factors leading to the black market.

Details

European Journal of Marketing, vol. 7 no. 3
Type: Research Article
ISSN: 0309-0566

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Article
Publication date: 29 March 2013

Isabel Buil, Leslie de Chernatony and Teresa Montaner

The aim of this paper is to shed light on the determinants of consumers' evaluations and purchase intentions of gift promotions. Factors analysed relate to the promoted…

Abstract

Purpose

The aim of this paper is to shed light on the determinants of consumers' evaluations and purchase intentions of gift promotions. Factors analysed relate to the promoted product, the gift, the relationship between the product and the gift, and consumer traits and perceptions.

Design/methodology/approach

A 2 (product type: utilitarian vs hedonic) × 2 (gift type: utilitarian vs hedonic) × 2 (brand type: high equity vs medium equity) between‐subjects factorial design was undertaken. Structural equation modelling was used to test the hypotheses on a sample of 247 respondents in the UK.

Findings

Gift attractiveness is the most important driver of consumers' overall evaluation of gift promotions, followed by the attitude toward the promoted brand, the perceived fit between the promoted product and the gift, the hedonic nature of the gift, plus value expression and entertainment benefits perceived by consumers. Results also reveal that deal proneness is positively associated with the hedonic benefits of value expression benefit and entertainment benefit. Finally, the overall evaluation of gift promotions with both brand attitudes and deal proneness positively influences consumers' purchase intentions.

Research limitations/implications

To generalise these findings, future research should use a wider sample.

Practical implications

The findings of this study provide guidelines for marketers designing their gift promotional strategies.

Originality/value

The increased popularity of gift promotions necessitates a better understanding of the factors influencing consumers' evaluations. This study addresses the lack of research in this area by simultaneously investigating the effect of different key factors.

Details

European Journal of Marketing, vol. 47 no. 3/4
Type: Research Article
ISSN: 0309-0566

Keywords

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