The Effect of Online External Reference Price on Perceived Price, Store Image, and Risk

Abstract

Previous research has shown that external reference prices provided by price comparison sites are known to increase both sellers’ price competition and buyers’ price sensitivity. However, there is no clear answer regarding the different impacts of various competition patterns, which are caused by the advent of competitors within price comparison sites, with respect to consumers’ perceptions of price, store image, and risk. Our objective in this research is to investigate the effect of the external reference price within price comparison sites, which is determined by competitors’ offering price, on perceived price, store image, and risk. In this research, we investigated whether perceived price, store image, and risk differ according to 1) store name (a known vs. unknown store); 2) brand name (a known vs. unknown brand); and 3) product category (look-and-feel vs. non-look and-feel). Our results demonstrate that the effect of online external reference prices is significant on store image for an unknown store, regardless of product category. In addition, the effect of online external reference prices is significant on the price and risk perceptions for look-and-feel products, but not for non-look-and-feel products when the focal mall is an unknown store. However, the interaction effect on price perception disappears when the focal mall is a known store.