A Study of the Effects of Product Evaluation from Others on Willingness-to-pay: Dual Process System and Social Influence View

This study focuses on the elicitation of willingness-to-pay (WTP) when others provide an evaluation of WTP (WTP information). From an economic rationality perspective, value or WTP should be consistent and independent from others’ evaluation. Even when WTP information affects one’s WTP, it can be interpreted to deliver information about quality and value of the product under uncertainty situation without encroaching on economic rationality. However, preference anomalies, such as the WTP-WTA gap and preference reversal, and cognitive biases caused by such heuristics as anchoring challenges the economic rationality view. In this background, this study addresses three important issues. First, the effects of WTP information may follow low-elaborative System 1 process rather than high-elaborative System 2 process which economic rationality view assumes. Second, WTP information may function as a type of arbitrary social standard against which individuals feel their responses are being measured, and people may follow this information for social affiliation and/or group acceptance. Then, WTP information works as a kind of social pressure rather than as information. The third question concerns the type of information. WTP information may provide information related to others’ preference or social cost which is different from general product information assumed in the economic rationality view. These questions are theoretically and practically important regarding the stability of preference. If a WTP estimation follows a low-elaborative System 1 process, then WTP is vulnerable to various situational factors. If the WTP information communicates social costs and affects WTP, this means that WTP is dependent upon social factors, and is unstable. Two studies were conducted to address these questions. In the first study, WTP information was provided after subjects have made initial estimate on their own WTP. In the second, WTP information was provided before initial estimation of WTP. In each study, changes in WTP, explanatory variables of WTP, and level of uncertainty about the estimates were observed. The results indicate that high WTP information induces high WTP. This effect follows the high-elaborative System 2 process changing explanatory variables of WTP. Further, WTP information does the role of information rather than social pressure. Further, WTP information delivers social information, which is related to others’ preferences as well as social costs, rather than product information. The result that social information affects WTP means that WTP is not independent of social factors, and is unstable. This study also demonstrates how the effect of WTP information relates to perceived uncertainty, which is an important aspect in estimating value and significantly affects the consumer decision process. More changes in WTP and levels of uncertainty are incurred by WTP information when high uncertainty occurs before obtaining WTP information. Further, the effect of WTP information differs according to whether a prior value estimation exists.