8102019 Buying While Expecting to Sell the Economic Psychology of Online Resale

httpslidepdfcomreaderfullbuying-while-expecting-to-sell-the-economic-psychology-of-online-resale 16

Buying while expecting to sell The economic psychology of online resale

Hsunchi Chu a1 Shuling Liao b

a Department of Global Marketing and Logistics MingDao University 369 Wen-Hua Rd Peetow ChangHua 52345 Taiwanb Department of International Business Yuan Ze University 135 Fareast Rd Chung-Li 32002 Tao-Yuan Taiwan

a b s t r a c ta r t i c l e i n f o

Article history

Received 1 August 2008

Received in revised form 1 January 2009

Accepted 1 March 2009

Keywords

Consumer online resale

C2C e-commerce

Mental accounting

Resale reference price

Consumer online resale is becoming increasingly common for transactions of secondhand goods However

when accompanied by a preconceived intention to resell a product after using it the initial consumer

purchasing decision for self-use is complicated by the estimated resale value of that good We applied the

principles of mental accounting to develop and evaluate a new concept that may in 1047298uence consumer resale

and purchase intention external resale reference price (ERRP) The study examines how online consumer

sellers economic psychology of buying affected their expectation of future online resale outcome The results

indicate that (1) consumers awareness of future online resale potential can in1047298uence their purchasing

decisions (2) ERRP which is mediated by the estimated resale return can increase purchase intention and

(3) the effects of ERRP on purchase intention are moderated by online resale likelihood but are minimal

when consumers are aware that resale possibility is extremely low

copy 2009 Elsevier Inc All rights reserved

1 Introduction

Imagine the following scenario You 1047297nd a high-quality premium

brand jacket with a style that you love you want to buy it and its thelast one in the store However you decide against it because the price

(US$800) far exceeds your budget and you fear that you might regret

buying it later This situation is not dif 1047297cult to imagine and may even

sound familiar But what if a business-savvy friend or colleague

assured you that the jacket could be resold online for about US$700

even after you owned it for some time Would this information make

youfeelmorecomfortable andthusmorelikely to purchasethe jacket

Consumer behavior studies have long centered on purchasing

behavior How consumers resell goods online remains relatively less

known and has mostly been investigated in the context of face-to-

face interpersonal transactions such as garage sales and 1047298ea markets

(Belk 1988 Herrmann 2006 Herrmann and Soiffer 1984 Sherry

1990) However in this era of e-commerce an increasing number

of consumers not only purchase but also resell merchandise via

consumer-to-consumer (C2C) Web sites and thus it is important to

gain a better understanding of this rapidly growing sector of the

market This type of consumer resale behavior given its initial self-

use acquisition purpose differs from the behavior of retailers and

therefore requires novel research (Chu and Liao 2007) Indeed this

research gap in consumer online resale has not even been 1047297lled by

online auction studies which have mainly addressed online buying

behavior and auction mechanisms such as bidding strategies andWeb assurance tools Therefore we investigated consumer online

resale behavior by assessing the pivotal role of C2C Web sites as a

channel for the sale of secondhand goods and their in1047298uence on

consumers purchase decisions

Theconcept of reference price is well established and continuesto

receive attention in the marketing and consumer behavior literature

(Chandrashekaran and Grewal 2006 Monroe and Lee 1999 Moon

and Voss 2009 Rajendran and Tellis 1994 Winer 1986) An internal

reference price (IRP) can be de1047297ned as ldquoan internal price to which

consumers compare observed pricesrdquo (Winer 1989 p 35) Scholars

commonly agree that consumers possess an internal reference which

may be based on previous experience (Lattin and Bucklin 1989

Winer 1989) external information such as advised prices (Chandra-

shekaran and Grewal 2006 Urbany et al 1988) the reserve price of

an online auction (Kamins et al 2004) andor contextual effects

(Lichtenstein and Bearden 1988) Empirical research has proved that

consumersbehave as if they have a reference price to which they refer

in their decision process (Kalyanaram and Winer 1995) and that

retailers can improve consumers perceptions of IRP by providing an

external reference price (ERP) When making decisions under

ambiguous circumstances consumers are prone to using externally

available information as anchors to adjust their estimates (Einhorn

and Hogarth 1986 Tversky and Kahneman 1974) The adjustments

move in the direction of the anchor and the degree of adjustment

depends on theextent to which theexternalanchor differs from initial

estimates (Chandrashekaran and Grewal 2006)

Journal of Business Research 63 (2010) 1073ndash1078

We thank our two anonymous reviewers and JBR editor for their insightful

comments This work was supported in part by the National Science Council under

Grants No NSC97-2410-H-451-008 and No NSC97-2410-H-155-023

Corresponding author Tel +886 3 463880x2684

E-mail addresses chcmduedutw (H Chu) ibslliaosaturnyzuedutw (S Liao)1 Tel +886 4 8876660x7623

0148-2963$ ndash see front matter copy 2009 Elsevier Inc All rights reserved

doi101016jjbusres200903023

Contents lists available at ScienceDirect

Journal of Business Research

8102019 Buying While Expecting to Sell the Economic Psychology of Online Resale

httpslidepdfcomreaderfullbuying-while-expecting-to-sell-the-economic-psychology-of-online-resale 26

To study consumer online resale behavior and its in1047298uence on

purchase decisions we broadened this concept of reference price

which applies only to the buying phase to include reference prices

that are used while making online resale decisions That is we

developed the concept of ldquoresale reference pricerdquo by de1047297ning an

ldquointernal resale reference pricerdquo (IRRP) as the resale price consumers

accept based on subjective estimations and the concept of ldquoexternal

resale reference pricerdquo (ERRP) as the potential market price of resold

items that sellers can infer based on market information We proposethat resale reference price is an important factor that in1047298uences

consumer resale behavior and purchase decisions because it relates

directly to the cost and bene1047297t of possessing a product

Given that the idea of ldquothe consumer as resellerrdquo is relatively new

we applied theconcept of mental accounting (Thaler 1985) to explain

and investigate the following (1) how consumers might act with

respect to buying when they are aware or unaware of future online

resale opportunity (2) how consumer purchase intention changes as

one compares the cost of an item and future resale returns against

ERRP information and (3) how consumer purchase intention may be

in1047298uenced by the interaction between ERRP and the expected likeli-

hood of resale

2 Theoretical foundation and hypotheses

Drawing on prospect theory (Kahneman and Tversky 1979 1983)

Thaler (1985) developed ldquomental accountingrdquo principles to explain

how people maximize the utility of a decision via a process of coding

categorizing and evaluating multiple events related to that decision

Given the shape of the value function it is better to segregate

ldquomultiple gainsrdquo and ldquomixed lossesrdquo and to integrate ldquomultiple lossesrdquo

and ldquomixed gainsrdquo (see Thaler 1980 1985) All of these principles

with the possible exception of the rule of integration of multiple

losses are generally robust (Kim 2006 Thaler 1999) and are sup-

ported by many empirical tests (Gourville and Soman 1998 Heath

et al 1995 Linville and Fischer 1991 Thaler and Johnson 1990)

Mental accounting assumes that people practice hedonic editing

that is multiple events are determined by whether they are mentally

integrated or separated before they are subjectively evaluated tomake individuals happier (Thaler 1985) Under this assumption

consumers may set budgets for categories of expenses and use

resources differently depending on how they are mentally ldquolabeledrdquo

(Heath and Soll 1996 Thaler 1980 1985) They may even create

ldquomental accountsrdquo when making a purchase and practice ldquomental

depreciationrdquo to spread the cost of an item implicitly over time or use

By adding an assessment of consumption to their subjective account

they can also align costs and bene1047297ts to make an expense seem less

like a ldquolossrdquo (Heath and Fennema 1996) In other words for goods

that are acquired and used consumers may subjectively depreciate

the initial purchase price and create a mental book value for the

product as it isused(Heath and Fennema 1996) When a replacement

purchase is made the buyer also ldquopaysrdquo a subjective price that is equal

to a write-off of this remaining book value (Okada 2001 Purohit1995)

In a consumer purchasing and consumption model payments for

products can be viewed as losses whereas the bene1047297ts derived from

continuously using the products can be considered gains (Prelec and

Loewenstein 1998 Sha1047297r and Thaler 2006 Thaler 1999) Thus let X

be the bene1047297t of possessing product A v( X ) the value of possessing

product A in the value function of the Prospect Theory Y the price of

product A v(Y ) the value of saving the cash (not purchasing Y )

equivalent to the cost of product Y Z the resale reference price of

product A and v( Z ) the value of reselling product A online at a price

of Z Then when v( X )minusv(Y )b0 consumerswill have a lower intention

to purchase that product because there is a net loss upon purchase

(Okada 2001) However the online resale return of a resalable item

v( Z ) could be seen as a gain which if high enough may cover the net

loss associated with the purchase If so then v( X )minusv(Y )) + v( Z )N0

Because individuals are loss averse (Kahneman and Tversky 1979

Tversky and Kahneman 1991) they are typically much more satis1047297ed

when they can integrate a loss (v( X )minusv(Y )) with an equivalent or

larger gain (v( Z )) (Thaler 1985 Linville and Fischer 1991) By

combining both purchase and resale assessments a buyer has an

opportunity to eliminate the loss with the perceived future gain thus

avoiding the pain of experiencing the loss on its own ( Heath and

Fennema 1996)Under the above circumstances it may be easier to stimulate the

desire to buy a product among consumers with high online resale

awareness than among consumers with low online resale awareness

As high-awareness consumers consider the future disposable cash

they will receive from the future online resale they may feel more

comfortable 1047297nancially which may ease their sensitivity toward the

price of the current purchase and therefore enhance their purchase

intention In this way a resaleplan makes more brands and individual

products affordable

H1 Prior to a purchase consumers who are highly aware of the

possibility of reselling a good online after acquiring it has a greater

intentionto buythe good than thosewith lowonlineresale awareness

Consumers are concerned about the mental book value of areusable item and are able to estimate it mentally (Okada 2001

Purohit 1995) Therefore the price at which they can resell a

possession should be an important factor affecting their initial

purchase decision for that possession assuming that resale awareness

is formed prior to the purchase Even then only when the resale price

is high enough can individuals practice mixed gain by hiding a small

loss into the larger gain In the value function v( X )minusv(Y ) + v( Z ) the

higher the ERRP the more return or value the consumer can expect to

receive v( Z ) or the higher the net gain from integrating the purchase

cost and online resale return On the other hand when a consumer

resells a possession the subjective book value of the resold item will

most likely become the IRRP of that item which is a key factor to

consider when evaluating whether an ERRP is reasonable and

acceptable A higher resale price indicates a lower depreciation ratewhich drives the ERRP higher than the IRRP thus making consumers

more satis1047297ed with the product

H2 Among consumers with high online resale awareness the higher

the ERRP of a good the greater their intention to purchase the good

Building on Tversky and Kahneman (1981) who found that

individuals may act differently toward the same scenario described in

two different ways we propose that a consumers purchase intention

can be enhanced in at least two different ways by either a positive or

negative framing condition In a positive framing condition con-

sumers focus on the resale return interpreting the situation as an

increase in bene1047297t Because consumers suffer the pain of paying

when purchasing a good (Prelec and Loewenstein 1998 Sha1047297r and

Thaler 2006 Thaler 1999) they are eager to overcome that pain bydeveloping positive justi1047297cation for making the purchase (Kivetz

1999 Sha1047297r et al 1993 Strahilevitz and Myers 1998) One way to

maximum value of consumption is to create a mental account of

estimated resale return and add the expected return into it to cover

the loss of purchase

Sha1047297r and Thaler (2006) investigated how consumption may be

mentally separated or decoupled temporally (Gourville and Soman

1998 Prelec and Loewenstein 1998) from purchase They found that

such goods are assessed using multiple frames and alternative

accounting schemes and are often mentally coded as incurring no

cost or even as savings The authors argued that the value of items can

change for a variety of reasons including depreciation appreciation

market valuation the cost of money and personal taste Based on

these 1047297ndings we propose that when consumers acknowledge a

1074 H Chu S Liao Journal of Business Research 63 (2010) 1073ndash1078

8102019 Buying While Expecting to Sell the Economic Psychology of Online Resale

httpslidepdfcomreaderfullbuying-while-expecting-to-sell-the-economic-psychology-of-online-resale 36

feasible resale plan prior to a purchase they will not conceptually

spread the total cost and depreciate its value evenly over its period of

consumption as they would for a conventional purchase but rather

will expect a potentially high return upon resale Under this scenario

a higher ERRP (ie higher secondary price and thus higher estimated

resale return) leads to a greater v( Z ) and is thus a more persuasive

reason to make the initial purchase Therefore we propose the fol-

lowing hypothesis to further examine the purchasing psychology of

consumersH3 Estimated resale return has a mediatingeffect on the relationship

between ERRP and purchase intention Speci1047297cally an increase in

ERRP will lead to an increase in estimated resale return which in turn

increases purchase intention

In contrast in a negative framing condition consumers may men-

tally deduct an items estimated resale value from the actual initial

payment interpreting the situation as a decrease in payment In this

way consumers feel more comfortable with the deal by pretending

that the item cost less than it did at that point in time The process of

consumption may also affect a consumers mental accounting For

instance transportation costs search costs or waiting time could

possibly increase the perceived payment while an unexpected

discount in stores (Ha et al 2006) could decrease the accountA higher ERRP indicates that an item has a higher residual value

after usage This value can be considered another form of cash

possessed by a consumer with a resalableitemthat isa portion of the

payment is considered inherent to or ldquostored valuerdquo of the merchan-

dise thus subjectively decreasing the perceived purchase payment

This can be illustrated by the value function v( X )minusv(Y minus Z ) Indeed

given thesame bene1047297ts v( X ) consumers prefer a higher Z and a lower

cost v(Y minus Z ) therefore a higher ERRP increases purchase intention

H4 The perceived purchase payment has a mediating effect on the

relationship between ERRP and purchase intention Speci1047297cally an

increase in ERRP will lead to a decrease in the perceived purchase

price which in turn increases purchase intention

Several studies report that reference cues as numbers whetherrelated (Chandrashekaran and Grewal 2006 Urbany et al 1988) or

unrelated (Nunes and Boatwright 2004 Tversky and Kahneman

1974) to a given topic can have an anchoring effect (Tversky and

Kahneman 1974) on an individuals decision The effect refers to the

adjustment of ones assessment higher or lower based on the

previously presented external information or ldquoanchorrdquo For instance

consumer internal price perception at the time of purchase can be

in1047298uenced by providing an external price for that same item

(Chandrashekaran and Grewal 2006) or even a different item

(Nunes and Boatwright 2004) In these studies the external and

internal prices are both directly related to the payment to purchase

a good which thus places them at the same conceptual level for

comparison

However the essence of resale reference price (ERRP and IRRP) isquite different First it relates directly to resale instead of purchase

activity and refers to the money consumers will receive after selling a

possession rather than the price they should pay Thus resale refer-

ence price is on a different conceptual level and cannot be compared

directly to reference price of purchase Further the items being resold

are typically usedsecondhand which further complicates the

calculation of resale price IRP derives mainly from previous purchase

experience (Lattin and Bucklin 1989 Winer 1989) while IRRP is

in1047298uenced by product usage mental depreciation (Okada 2001

Purohit 1995) and personal online resale skills and experience (Chu

and Liao 2008) in addition to previous purchase experience

Another difference between traditional reference prices and our

proposed resale reference prices is the timing Resale reference price

occurs after an item has been acquired while the reference price of

purchase occurs before the item is acquired The temporal gap makes

the in1047298uence of resale reference price on purchase decisions differ

from the in1047298uence of the traditional reference price because more risk

and uncertainty are involved For instance consumers may largely

discount the resale values because the online resale will happen

farther in the future and the quality of the product or market situation

at that time is uncertain Accordingly we contended that ERRPs

related directly to the bene1047297ts of acquiring a product could be seen as

one of the most important product attributes when making purchaseevaluations Therefore the effect of ERRPs on purchase intention

rather than simply being an external anchoring was achieved through

careful mental deliberation about the products bene1047297ts and costs In

other words a high ERRP will not generate the same in1047298uence on a

consumers purchase intentiononce he or she is aware that thechance

of making a successful online resale is very low

H5a The ERRP of a good will not in1047298uence purchase intention when

consumers are aware that the resale possibility is extremely low

H5b The higher a goods ERRP the greater its in1047298uence on purchase

intention when consumers are aware that the resale possibility is

extremely high

3 Study 1

31 Method

We used a between-subjects design to examine the hypotheses

and chose a mobile phone for the experiment because it is the best-

selling item in Taiwans online auctions (Yam Survey 2006) We set

the initial tag price for the newest most traded item among mobile

phones at NT$10000 (approximately US$312) and the ERRP at three

levels NT$3000 (US$93) NT$6000 (US$187) and NT$9000 (US$281)

to manipulate low medium and high prices respectively We select-

ed these pricesbecause they correspond to the average IRRP reported

under both optimistic and pessimistic conditions by 80 members of

the online community Youthwant (wwwyouthwantcomtw) in our

online pilot study The ERRP of NT$9000 (high ERRP condition) isabove the average optimistic resale price (NT$7311) while NT$6000

(medium ERRP condition) is between the average optimistic resale

and pessimistic resale price (NT$4392) and NT$3000 (low ERRP

condition) is below the average pessimistic resale price

The formal online questionnaire consisted of four sections The

1047297rst section provided a product description and a photo followed by a

priming manipulation of future online resale possibility (low vs high)

Section 2 measured the respondents IRRPs of the target product

at three levels (highest average and lowest) and provided three

manipulation check questions on the stimuli provided in Section 1

Section 3 described the hypothetical buying price of the target

product and the ERRP for manipulation Section 4 presented a

manipulation check item about the ERRP information in the previous

section and measured the respondents intention to buy the targetproduct the expected future resale return their subjective purchase

payment after con1047297guring purchase cost and estimated resale return

The independent variables for each description were online resale

awareness (low and high) and ERRP (low medium high) with the

ERRP manipulated only for the high-awareness groups This resulted

in four versions of the questionnaire for the main study in which the

subjects were assigned to one low-awareness group and three high-

awareness groups with three ERRP levels set individually

We also conducted the main experiment on Youthwant The

sample consisted of 477 participants with an average age of 25 years

Of these 63 were high school students 199 were undergraduate or

graduate college students and 215 were not students Of the 477

participants 270 had online resale experience and 207 did not All of

the participants were registered members of Youthwant They were

1075H Chu S Liao Journal of Business Research 63 (2010) 1073ndash1078

8102019 Buying While Expecting to Sell the Economic Psychology of Online Resale

httpslidepdfcomreaderfullbuying-while-expecting-to-sell-the-economic-psychology-of-online-resale 36

feasible resale plan prior to a purchase they will not conceptually

spread the total cost and depreciate its value evenly over its period of

consumption as they would for a conventional purchase but rather

will expect a potentially high return upon resale Under this scenario

a higher ERRP (ie higher secondary price and thus higher estimated

resale return) leads to a greater v( Z ) and is thus a more persuasive

reason to make the initial purchase Therefore we propose the fol-

lowing hypothesis to further examine the purchasing psychology of

consumersH3 Estimated resale return has a mediatingeffect on the relationship

between ERRP and purchase intention Speci1047297cally an increase in

ERRP will lead to an increase in estimated resale return which in turn

increases purchase intention

In contrast in a negative framing condition consumers may men-

tally deduct an items estimated resale value from the actual initial

payment interpreting the situation as a decrease in payment In this

way consumers feel more comfortable with the deal by pretending

that the item cost less than it did at that point in time The process of

consumption may also affect a consumers mental accounting For

instance transportation costs search costs or waiting time could

possibly increase the perceived payment while an unexpected

discount in stores (Ha et al 2006) could decrease the accountA higher ERRP indicates that an item has a higher residual value

after usage This value can be considered another form of cash

possessed by a consumer with a resalableitemthat isa portion of the

payment is considered inherent to or ldquostored valuerdquo of the merchan-

dise thus subjectively decreasing the perceived purchase payment

This can be illustrated by the value function v( X )minusv(Y minus Z ) Indeed

given thesame bene1047297ts v( X ) consumers prefer a higher Z and a lower

cost v(Y minus Z ) therefore a higher ERRP increases purchase intention

H4 The perceived purchase payment has a mediating effect on the

relationship between ERRP and purchase intention Speci1047297cally an

increase in ERRP will lead to a decrease in the perceived purchase

price which in turn increases purchase intention

Several studies report that reference cues as numbers whetherrelated (Chandrashekaran and Grewal 2006 Urbany et al 1988) or

unrelated (Nunes and Boatwright 2004 Tversky and Kahneman

1974) to a given topic can have an anchoring effect (Tversky and

Kahneman 1974) on an individuals decision The effect refers to the

adjustment of ones assessment higher or lower based on the

previously presented external information or ldquoanchorrdquo For instance

consumer internal price perception at the time of purchase can be

in1047298uenced by providing an external price for that same item

(Chandrashekaran and Grewal 2006) or even a different item

(Nunes and Boatwright 2004) In these studies the external and

internal prices are both directly related to the payment to purchase

a good which thus places them at the same conceptual level for

comparison

However the essence of resale reference price (ERRP and IRRP) isquite different First it relates directly to resale instead of purchase

activity and refers to the money consumers will receive after selling a

possession rather than the price they should pay Thus resale refer-

ence price is on a different conceptual level and cannot be compared

directly to reference price of purchase Further the items being resold

are typically usedsecondhand which further complicates the

calculation of resale price IRP derives mainly from previous purchase

experience (Lattin and Bucklin 1989 Winer 1989) while IRRP is

in1047298uenced by product usage mental depreciation (Okada 2001

Purohit 1995) and personal online resale skills and experience (Chu

and Liao 2008) in addition to previous purchase experience

Another difference between traditional reference prices and our

proposed resale reference prices is the timing Resale reference price

occurs after an item has been acquired while the reference price of

purchase occurs before the item is acquired The temporal gap makes

the in1047298uence of resale reference price on purchase decisions differ

from the in1047298uence of the traditional reference price because more risk

and uncertainty are involved For instance consumers may largely

discount the resale values because the online resale will happen

farther in the future and the quality of the product or market situation

at that time is uncertain Accordingly we contended that ERRPs

related directly to the bene1047297ts of acquiring a product could be seen as

one of the most important product attributes when making purchaseevaluations Therefore the effect of ERRPs on purchase intention

rather than simply being an external anchoring was achieved through

careful mental deliberation about the products bene1047297ts and costs In

other words a high ERRP will not generate the same in1047298uence on a

consumers purchase intentiononce he or she is aware that thechance

of making a successful online resale is very low

H5a The ERRP of a good will not in1047298uence purchase intention when

consumers are aware that the resale possibility is extremely low

H5b The higher a goods ERRP the greater its in1047298uence on purchase

intention when consumers are aware that the resale possibility is

extremely high

3 Study 1

31 Method

We used a between-subjects design to examine the hypotheses

and chose a mobile phone for the experiment because it is the best-

selling item in Taiwans online auctions (Yam Survey 2006) We set

the initial tag price for the newest most traded item among mobile

phones at NT$10000 (approximately US$312) and the ERRP at three

levels NT$3000 (US$93) NT$6000 (US$187) and NT$9000 (US$281)

to manipulate low medium and high prices respectively We select-

ed these pricesbecause they correspond to the average IRRP reported

under both optimistic and pessimistic conditions by 80 members of

the online community Youthwant (wwwyouthwantcomtw) in our

online pilot study The ERRP of NT$9000 (high ERRP condition) isabove the average optimistic resale price (NT$7311) while NT$6000

(medium ERRP condition) is between the average optimistic resale

and pessimistic resale price (NT$4392) and NT$3000 (low ERRP

condition) is below the average pessimistic resale price

The formal online questionnaire consisted of four sections The

1047297rst section provided a product description and a photo followed by a

priming manipulation of future online resale possibility (low vs high)

Section 2 measured the respondents IRRPs of the target product

at three levels (highest average and lowest) and provided three

manipulation check questions on the stimuli provided in Section 1

Section 3 described the hypothetical buying price of the target

product and the ERRP for manipulation Section 4 presented a

manipulation check item about the ERRP information in the previous

section and measured the respondents intention to buy the targetproduct the expected future resale return their subjective purchase

payment after con1047297guring purchase cost and estimated resale return

The independent variables for each description were online resale

awareness (low and high) and ERRP (low medium high) with the

ERRP manipulated only for the high-awareness groups This resulted

in four versions of the questionnaire for the main study in which the

subjects were assigned to one low-awareness group and three high-

awareness groups with three ERRP levels set individually

We also conducted the main experiment on Youthwant The

sample consisted of 477 participants with an average age of 25 years

Of these 63 were high school students 199 were undergraduate or

graduate college students and 215 were not students Of the 477

participants 270 had online resale experience and 207 did not All of

the participants were registered members of Youthwant They were

1075H Chu S Liao Journal of Business Research 63 (2010) 1073ndash1078

8102019 Buying While Expecting to Sell the Economic Psychology of Online Resale

httpslidepdfcomreaderfullbuying-while-expecting-to-sell-the-economic-psychology-of-online-resale 46

compensated fortheir participation in thestudy with 30 virtual points

(approximately NT$30) which they could spend on gifts or for Web

site services The research was limited to C2C online auctions but

individuals who had never resold anything via an online auction were

allowed to participate The wording we used to describe an intention

to purchase would be clear to anyone with a basic understanding of

C2C online auctions To improve reliability each subject was allowed

to complete only one questionnaire using the Web site system

controlAll participants read a description of a purchase decision about a

new mobile phone costing NT$10000 The low-awareness group read

a scenario indicating that the possibility of reselling the new mobile

phone online after acquiring it was low The high-awareness groups

read one of three different scenarios all of which indicated that the

possibility of reselling the new mobile phone was high Each scenario

in the high-awareness groups offered a different ERRP as described

previously Finally we asked the participants in all four groups to rate

their intention to purchase the new mobile phone using a 7-point

Likert scale In addition we asked the high-awareness groups to

estimate the online resale return and the perceived purchase

payment The results of the manipulation check to con1047297rm if the

provided scenarios of online resale awareness and ERRPs were

well received showed that all of the manipulations were enacted as

intended

32 Results

Table 1 lists the descriptive statistics of dependent variables for all

experimental groups A t -test conducted on intention to purchase

yielded a signi1047297cant difference between the low- and high-awareness

groups (t =minus451 pb 001) This result supports H1 that consumers

with high online resale awareness will have a greater intent to

purchase

A one-way ANOVA conducted on intention to purchase among

the three high-awareness groups revealed signi1047297cant between-

group differences (F =162 p b 001) A Scheffe post-hoc test further

demonstrated signi1047297cant mean differences among the groups (HighN

MediumNLow psb 05) Thus as predicted H2 is supported by theresults among consumers who have high online resale awareness for

a particular product a higher ERRP led to a greater intent to purchase

To examine H3 we performed a one-way ANOVA on the estimated

resale return ratings of the three high-awareness groups There was a

signi1047297cant between-group effect (F =167631 pb 001) which we

con1047297rmed by signi1047297cant Scheffe post-hoc tests (HighNMediumNLow

psb 001) Hence among consumers with high online resale aware-

ness the higher the ERRP the higher the estimated resale return

Next we conducted a simple regression analysis to test the rela-

tionship between estimated resale return and intention to purchase

As expected purchase intention was positively related to estimated

resale return ( β =329 pb 001) To test the mediating effect of esti-

mated resale return we followed a three-step procedure suggestedby

Baron and Kenny (1986) A mediating effect can be assumed if the

following criteria are met (1) there is a signi1047297cant relationship

between the independent (ERRPs) and dependent (intention to

purchase) variables (2) there is a signi1047297cant relationship between the

independent variable (ERRPs) and the mediator (estimated resale

return) and (3) the effect of the independent variable (ERRPs) on the

dependent variable (intention to purchase) is signi1047297

cantly reducedafter the mediator (estimated resale return) is added to the equation

The regression analyses demonstrated a complete mediating effect of

estimated resale return as (1) ERRP had a signi1047297cantly positive effect

on purchase intention ( β =289 pb 001) (2) estimated resale return

had a signi1047297cantly positive effect on purchase intention ( β =329

pb 001) and (3) β (117) for ERRP in the multiple regression model

was no longer signi1047297cant ( p =094N 05) whereas β (247) for the

estimated resale return remained signi1047297cant ( pb 001) In addition a

Sobel test was signi1047297cant (Sobel test statistic=268 pb 01) suggest-

ing that estimated resale return mediated the main effect of ERRP on

purchase intention Thus the statistical evidence supports H3

A one-way ANOVA performed to test H4 revealed a signi1047297cant

between-group effect on perceived purchase payment among the

three high-awareness groups (F =10322 p b 001) Scheffe post-hoc

tests (HighbMediumbLow psb 001) con1047297rmed this result Accord-

ingly among consumers with high online resale awareness the

higherthe ERRP the lower the perceived purchase payment Next we

calculated a simple regression to determine the relationship between

perceived purchase payment and intention to purchase As expected

there was a negative relationship between purchase intention and

perceived purchase payment ( β =minus 201 pb 001) indicating that

the higher the perceived purchase payment the lower the intention

to buy We applied the same three-step procedure (Baron and

Kenny 1986) described for H3 to test the mediating effect of

perceived purchase payment for H4 The results showed no signi1047297cant

mediating effect of perceived purchase payment between ERRP and

purchase intention as β for ERRP in the multiple regression model

remained signi1047297cant ( β =26 pb 001) after perceived purchase

payment was included in the equation whereas β for perceived pur-chase payment was insigni1047297cant ( β =minus 05 p =41N 05) Thus H4 is

only partially supported because perceived purchase payment did not

mediate the main effect of ERRP on purchase intention

Comparing this insigni1047297cant result (H4) to the substantiated

mediating effect of estimated resale return (H3) payment perception

did not in1047298uence the relationship between ERRP and purchase

intention as much as did estimated resale return during consumers

subjective evaluations of online resale This implies that consumers

1047297nd it dif 1047297cult to deduce the net purchase payment based on ERRP

cues That is they feel a strong loss of money upon making a payment

which cannot be resolved by expected return in the future In other

words they do not equate the resale value of possessions with cash

Therefore the increased purchase intention is derived mainly by a

higher net gain perception based on estimated resale return This mayexplain why there was no mediating effect of perceived purchase

payment

4 Study 2

41 Method

We conducted Study 2 to con1047297rm that the effect of ERRPs on

consumers intention to purchase did not derive from an anchoring

effect but rather a mental accounting effect For the experiment we

used a 2 (extremely low resale possibility vs extremely high resale

possibility)times2 (low vs high ERRP) between-subjects design admin-

istered on the Youthwant online community We replicated the pro-

cedure of Study 1 but manipulated four different purchase scenarios

Table 1Descriptive statistics of Study 1

Numbers of

participants

Intention to

purchase

Estimated

resale return

Perceived

payment

Mean S D Mean S D Mean S D

Low online

resale

awareness

120 331 133 NA

High online

resale

awareness

357 401 153 5 47713 274868 4610 94 349356

Low ERRP 118 3 46 153 3 16525 130387 715847 156081

Medium

ERRP

119 403 129 5 37552 150885 4741 03 363620

High ERRP 120 4 54 158 785123 2 77116 1 97686 2 74907

Abbreviations ERRP external resale reference price SD standard deviation

1076 H Chu S Liao Journal of Business Research 63 (2010) 1073ndash1078

8102019 Buying While Expecting to Sell the Economic Psychology of Online Resale

httpslidepdfcomreaderfullbuying-while-expecting-to-sell-the-economic-psychology-of-online-resale 56

to test interaction effects We organized the questionnaire as follows

After reading the same online purchase scenarios for a cell phone we

informed participants that the chance to resell the cell phone online

successfully was either ldquoextremely lowrdquo or ldquoextremely highrdquo The

questionnaire emphasized this wording to ensure that participants

perceived the manipulation of resale possibility strongly and clearly

To con1047297rm we performed manipulation checks to ask participants to

assess their perception using a 7-point Likert scale of the chance to

resell the target item successfully with 1 being extremely low and 7

being extremely high The group that showed high resale possibility

had a higher perception of resale likelihood than the low-possibility

group (M = 648 vs 166 t =minus797 pb 001) Following this exercise

we gave these participants purchase scenarios for a low ERRP (NT

$3000) and a high ERRP (NT$9000) respectively as a second test of

manipulating factors Finally we queried each groups intention to

purchase the cell phone In Study 2 the sample consisted of 440

participants with an average age of 24 years There were 110 subjects

in each group Of the total 54 were high school students 189 were

undergraduate or graduate college students and 197 were not

students Among the 440 participants 287 had online resale experi-

ence and 153 did not All of the participants were registered members

of Youthwant and had not participated in previous experiments

42 Results

Table 2 lists the descriptive statistics of dependent variables for all

experiment groups and Table 3 shows the results of a two-way

ANOVA with resale possibility and resale price as the independent

variables and intention to purchase as the dependent variable There

were signi1047297cant interaction effects (F =136 pb 001) which implies

that the effect of ERRP on purchase intention may be moderated by

perceived resale possibility

In support of H5a participants with a perception of extremely low

resale possibility showed the same level of purchase intention under

both low and high ERRP situations (t =088 p =038) And in support

of H5b participants who perceived an extremely high resalepossibility showed a higher purchase intention when stimulated

with a high ERRP (t =5485 pb 001) See Fig 1

In Study 2 ERRPs did not have a signi1047297cant effect on purchase

intention when consumers did not see a future resale bene1047297t for the

item In other words consumers are in1047298uenced by ERRPs only when

resale feasibility is high The results also indicate that a simple

anchoringeffect did not cause theincreased purchase intentionwith a

higher ERRP in Study 1 if it had it would have been present and thus

would have in1047298uenced purchase intention when the resale possibility

was extremely low in Study 2 This conclusion is reinforced by the

results indicating that the mean purchase intention in the extremely

low resale possibility groups of Study 2 was signi1047297cantly lower than

that of the low resale awareness group in Study 1 (M =264 vs 331

t =minus468 pb 001) This demonstrates that consumers are concerned

about the resale result and may feel disappointed about the failure of

an expected resale once their resale awareness is triggered

5 Discussion

Our results indicate that online resale awareness can signi1047297cantly

in1047298uence a consumers buying intentionprior to a purchase Informing

consumers about their future chances to resell a good prompts theirawareness and expectations for online resale which in turn enhances

their intentionto purchase thegood Therefore we suggest that online

resale awareness and expectations are important factors affecting both

purchasing and reselling behaviors

In addition once consumers have developed online resale aware-

ness their intention to purchase a good is affected by the ERRP level

The higher the perceived future resale price the more willing

consumers are to buy an item This implies that product preference

is determined not only by personal taste and product attributes but

also by the chances and outcome of the future resale Further we

discovered that aside from listing the acquisition price of a good

payment perception and estimated resale return in particular had the

greatest in1047298uence on purchase intention and resale plans These two

constructs are closely associated with the concepts of mental depre-ciation (Heath and Fennema 1996) and mental book value (Okada

2001) To be more speci1047297c a high ERRP signals a lower depreciation

rate a higherresale return anda lower acquisition cost of a good thus

making the good more desirable to purchase

Finally the mediating effect of estimated resale return between

ERRP and purchase intention suggests that consumers integrate

mixed gains (Thaler 1985 1999) by combining events subjectively to

boost perceived utility or to justify their purchase (Kivetz 1999

Sha1047297r et al 1993 Strahilevitz and Myers 1998) The present study

did not require participants to have online resale experience which

implies that consumers in general even those without such ex-

perience or plans to resell possessions online prefer products with a

higher resale price This indicates that a higher resale price may be an

important product attribute for consumers with resale awareness

Table 2

Descriptive statistics of Study 2

Resale possibility Resale reference

price

Numbers of

participants

Intention to

purchase

Mean S D

Extremely low online

resale possibility

Low ERRP 110 256 132

High ERRP 110 271 113

Total 220 264 123

Extremely high online

resale possibility

Low ERRP 110 343 151

High ERRP 110 454 149

Total 220 398 160

Total Low ERRP 220 300 148

High ERRP 220 362 160

Total 440 331 157

Abbreviations ERRP external resale reference price SD standard deviation

Table 3

Summary of ANOVA test of Study 2

Source Mean square F

Resale possibility 199127 106134

ERRP 43282 23069

Resale possibilityERRP 25536 13611

Abbreviations ERRP external resale reference price

Note Signi1047297cant at pb0001

Note

Signi1047297cant at pb

0001

Fig 1 Interaction effects of resale possibility and externalresale reference price(ERRP)

1077H Chu S Liao Journal of Business Research 63 (2010) 1073ndash1078

8102019 Buying While Expecting to Sell the Economic Psychology of Online Resale

httpslidepdfcomreaderfullbuying-while-expecting-to-sell-the-economic-psychology-of-online-resale 66

Finally the results of Study 2 con1047297rm that a mental evaluation process

about the bene1047297ts and costs of acquiring a product and not an

anchoring effect causes the observed effects of ERRPs and that the

failure of an expected resale may cause discon1047297rmation and thus

decrease purchase intention

6 Managerial implications

Our results imply that consumers who intend to resell online mayperceive lower purchase risk than those who intend only to buy They

are also more willing to purchase goods that they initially hesitated to

buy when they are aware that they can resell the goods they 1047297nd

unsatisfactory We suggest that marketers should consider the

changes brought about by the online secondary market in particular

the potential link between a new product and these secondary

markets (Purohit 1992 Zhao and Jagpal 2006) Whereas the

speculated cannibalization effect predicts that the C2C online auction

market may steal some sales from retailers the actions of online

auction sites that resell goods consumers do not want may actually

lead to increased sales of new products by retailers ( Paden and Stell

2005) Thus marketers should look favorably upon and implement

strategies to exploit secondary markets

7 Limitations and future research

Thepresent study has some limitations First all of the participants

were from the same online community in Taiwan More online and

of 1047298ine participants even persons from traditional secondary markets

should be tested to gain a deeper understanding of consumer pur-

chasing and resale behavior In addition we conducted the study in a

Chinese context and thus additional research is needed to investigate

consumer online resale behavior in other contexts As Chu and Liao

(2008) noted the product personal characteristics of the consumer

and situational factors can all in1047298uence consumer resale decisions

Thus future studies should include a wider range of products with

different characteristics participants with different levels of resale

experience and a variety of decision situations to further generalize

and con1047297rm the robustness of our 1047297ndings Finally ERRP is an im-portant factor that affects consumer online resale decisions Increas-

ing the number of different ERRP levels and enabling comparisons

among them could provide a more complete understanding of con-

sumer resale behavior The relationship between IRRPs and ERRPs as

well as how consumers determine resale prices is another potential

topic for further research

References

Baron RM Kenny DA The moderator-mediator variable distinction in social psycho-logical research conceptual strategic and statistical considerations J Pers SocPsychol 198651(6)1173ndash82

Belk RW Possessions and the extended self J Consum Res 198815(2)130ndash68Chandrashekaran R Grewal D Anchoring effects of advertised reference price and sale

price themoderatingrole of saving presentationformat J Bus Res200659(10ndash11)

1063ndash71Chu H Liao S Exploring consumer resale behavior in C2C online auctions taxonomy

and in1047298uences on consumer decisions Acad Mark Sci Rev 200711(3)1-27Chu H Liao S Toward a conceptual model of consumer online resale behavior an

exploratory study in Taiwan J Internet Commerce 20087(2)220ndash52Einhorn H Hogarth R Decision making under ambiguity J Bus 198659(4)225 ndash50Gourville JT Soman D Payment depreciation the behavioral effects of temporally

separating payments from consumption J Consum Res 199825(2)160ndash74Ha HH Hyun JS Pae JH Consumers mental accounting in response to unexpected price

savings at the point of sale Mark Intell Plann 200624(4)406ndash16

Heath C Fennema MG Mental depreciation and marginal decision making OrganBehav Hum Decis Process 199668(2)95-108

Heath C Soll JB Mental budgeting and consumer decisions J Consum Res 199623(1)40ndash52

Heath T Chatterjee S France K Mental accounting and changes in price the framedependence of reference dependence J Consum Res 199522(1)90ndash7

Herrmann GM Garage sales makes good neighbors building community throughneighborhood sales Hum Organ 200665(2)181ndash91

Herrmann GM Soiffer SM For fun and pro1047297t an analysis of the American garage saleUrban Life 198412(4)397ndash421

Kahneman D Tversky A Prospect theory an analysis of decision under risk

Econometrica 197947(2)263ndash

91Kahneman D Tversky A Choices value and frames Am Psychol 198339(4)341 ndash50Kalyanaram G Winer RS Empirical generalizations fromreference priceresearch Mark

Sci 199514(3)161ndash9Kamins MA Dreze X Folkes VS Effects of seller-supplied prices on buyers product

evaluationreferenceprices in an internet auction context J ConsumRes 200430(4)622ndash8

Kim HM The effect of salience on mental accounting how integration versus segrega-tion of payment in1047298uences purchase decisions J Behav Decis Making 200619(4)381ndash91

Kivetz R Advances in research on mental accounting and reason-based choice MarkLett 199910(3)249ndash66

Lattin JM Bucklin RE Reference effects of price and promotion on brand choicebehavior J Mark Res 198926(3)299ndash310

Lichtenstein DR Bearden WO An investigation of consumer evaluations of referenceprice discount claims J Bus Res 198817(2)189ndash200

Linville PW Fischer GW Preferences for separating or combining events J Pers SocPsychol 199160(1)5-23

Monroe KB Lee AY Remembering versus knowingissues in buyers processing of price

information J Acad Mark Sci 199927(2)207ndash25Moon S Voss G How do price range shoppers differ from reference price point

shoppers J Bus Res 200962(1)31ndash8Nunes J Boatwright P Incidental prices and their effect on willingness to pay J Mark

Res 200441(4)457ndash66Okada EM Trade-ins mental accounting and product replacement decisions J Consum

Res 200127(4)433ndash46Paden N Stell R Consumer product redistribution disposition decisions and channel

options J Mark Channels 200512(3)105ndash23Prelec D Loewenstein G The red and the black mental accounting of savings and debt

Mark Sci 199817(1)4-28Purohit D Exploring the relationship between the markets for new and used durable

goods the case of automobiles Mark Sci 199211(2)154ndash67Purohit D Playing theroleof buyerand seller the mental accounting oftrade-ins Mark

Lett 19956(2)101ndash10Rajendran KN Tellis GJ Contextual and temporal components of reference price J Mark

199458(1)22ndash34Sha1047297r E Simonson I Tversky A Reason-based choice Cognit 199349(12)11ndash36Sha1047297r E Thaler RH Invest now drink later spend never on the mental accounting of

delayed consumption J Econ Psychol 200627(5)694ndash712Sherry Jr JF A sociocultural analysis of a midwestern American 1047298ea market J Consum

Res 199017(1)13ndash30Strahilevitz MA Myers JG Donations to charity as purchase incentives how well they

work maydepend onwhatyou aretryingto sell J ConsumRes 199824(4)434ndash46Thaler RHTowardsa positivetheoryof consumerchoice J EconBehavOrgan19801(1)

39ndash60Thaler RH Mental accounting and consumer choice Mark Sci 19854(3)199ndash214Thaler RH Mental accounting matters J Behav Decis Making 199912(3)183ndash206Thaler RH Johnson EJ Gambling with the house money and trying to break even the

effects of prior outcomes on risky choice Manage Sci 199036(6)643ndash60Tversky A Kahneman D Judgment under uncertainty heuristics and biases Sci

1974185(4157)1124ndash31Tversky A Kahneman D The framing of decisions and the psychology of choice Sci

1981211(4481)453ndash8Tversky A Kahneman D Loss aversion in riskless choice a reference-dependent model

Quart J Econ 1991106(4)1039ndash61Urbany JE Bearden WO Weilbaker DC The effect of plausible and exaggerated refer-

ence prices on consumer perceptions and price search J Consum Res 198815(1)95-111

Winer RS A reference price model of brand choice for frequently purchased products J Consum Res 198613(2)250ndash6

Winer RS A multi-stage model of choice incorporating reference prices Mark Lett19891(1)27ndash36

Yam Survey (2006) httptaiwanyamorgtwsurvey Zhao H Jagpal S The effect of secondhand markets on the 1047297rms dynamic pricing and

new product introduction Int J Res Mark 200623(3)295ndash307

1078 H Chu S Liao Journal of Business Research 63 (2010) 1073ndash1078

8102019 Buying While Expecting to Sell the Economic Psychology of Online Resale

httpslidepdfcomreaderfullbuying-while-expecting-to-sell-the-economic-psychology-of-online-resale 56

to test interaction effects We organized the questionnaire as follows

After reading the same online purchase scenarios for a cell phone we

informed participants that the chance to resell the cell phone online

successfully was either ldquoextremely lowrdquo or ldquoextremely highrdquo The

questionnaire emphasized this wording to ensure that participants

perceived the manipulation of resale possibility strongly and clearly

To con1047297rm we performed manipulation checks to ask participants to

assess their perception using a 7-point Likert scale of the chance to

resell the target item successfully with 1 being extremely low and 7

being extremely high The group that showed high resale possibility

had a higher perception of resale likelihood than the low-possibility

group (M = 648 vs 166 t =minus797 pb 001) Following this exercise

we gave these participants purchase scenarios for a low ERRP (NT

$3000) and a high ERRP (NT$9000) respectively as a second test of

manipulating factors Finally we queried each groups intention to

purchase the cell phone In Study 2 the sample consisted of 440

participants with an average age of 24 years There were 110 subjects

in each group Of the total 54 were high school students 189 were

undergraduate or graduate college students and 197 were not

students Among the 440 participants 287 had online resale experi-

ence and 153 did not All of the participants were registered members

of Youthwant and had not participated in previous experiments

42 Results

Table 2 lists the descriptive statistics of dependent variables for all

experiment groups and Table 3 shows the results of a two-way

ANOVA with resale possibility and resale price as the independent

variables and intention to purchase as the dependent variable There

were signi1047297cant interaction effects (F =136 pb 001) which implies

that the effect of ERRP on purchase intention may be moderated by

perceived resale possibility

In support of H5a participants with a perception of extremely low

resale possibility showed the same level of purchase intention under

both low and high ERRP situations (t =088 p =038) And in support

of H5b participants who perceived an extremely high resalepossibility showed a higher purchase intention when stimulated

with a high ERRP (t =5485 pb 001) See Fig 1

In Study 2 ERRPs did not have a signi1047297cant effect on purchase

intention when consumers did not see a future resale bene1047297t for the

item In other words consumers are in1047298uenced by ERRPs only when

resale feasibility is high The results also indicate that a simple

anchoringeffect did not cause theincreased purchase intentionwith a

higher ERRP in Study 1 if it had it would have been present and thus

would have in1047298uenced purchase intention when the resale possibility

was extremely low in Study 2 This conclusion is reinforced by the

results indicating that the mean purchase intention in the extremely

low resale possibility groups of Study 2 was signi1047297cantly lower than

that of the low resale awareness group in Study 1 (M =264 vs 331

t =minus468 pb 001) This demonstrates that consumers are concerned

about the resale result and may feel disappointed about the failure of

an expected resale once their resale awareness is triggered

5 Discussion

Our results indicate that online resale awareness can signi1047297cantly

in1047298uence a consumers buying intentionprior to a purchase Informing

consumers about their future chances to resell a good prompts theirawareness and expectations for online resale which in turn enhances

their intentionto purchase thegood Therefore we suggest that online

resale awareness and expectations are important factors affecting both

purchasing and reselling behaviors

In addition once consumers have developed online resale aware-

ness their intention to purchase a good is affected by the ERRP level

The higher the perceived future resale price the more willing

consumers are to buy an item This implies that product preference

is determined not only by personal taste and product attributes but

also by the chances and outcome of the future resale Further we

discovered that aside from listing the acquisition price of a good

payment perception and estimated resale return in particular had the

greatest in1047298uence on purchase intention and resale plans These two

constructs are closely associated with the concepts of mental depre-ciation (Heath and Fennema 1996) and mental book value (Okada

2001) To be more speci1047297c a high ERRP signals a lower depreciation

rate a higherresale return anda lower acquisition cost of a good thus

making the good more desirable to purchase

Finally the mediating effect of estimated resale return between

ERRP and purchase intention suggests that consumers integrate

mixed gains (Thaler 1985 1999) by combining events subjectively to

boost perceived utility or to justify their purchase (Kivetz 1999

Sha1047297r et al 1993 Strahilevitz and Myers 1998) The present study

did not require participants to have online resale experience which

implies that consumers in general even those without such ex-

perience or plans to resell possessions online prefer products with a

higher resale price This indicates that a higher resale price may be an

important product attribute for consumers with resale awareness

Table 2

Descriptive statistics of Study 2

Resale possibility Resale reference

price

Numbers of

participants

Intention to

purchase

Mean S D

Extremely low online

resale possibility

Low ERRP 110 256 132

High ERRP 110 271 113

Total 220 264 123

Extremely high online

resale possibility

Low ERRP 110 343 151

High ERRP 110 454 149

Total 220 398 160

Total Low ERRP 220 300 148

High ERRP 220 362 160

Total 440 331 157

Abbreviations ERRP external resale reference price SD standard deviation

Table 3

Summary of ANOVA test of Study 2

Source Mean square F

Resale possibility 199127 106134

ERRP 43282 23069

Resale possibilityERRP 25536 13611

Abbreviations ERRP external resale reference price

Note Signi1047297cant at pb0001

Note

Signi1047297cant at pb

0001

Fig 1 Interaction effects of resale possibility and externalresale reference price(ERRP)

1077H Chu S Liao Journal of Business Research 63 (2010) 1073ndash1078

8102019 Buying While Expecting to Sell the Economic Psychology of Online Resale

httpslidepdfcomreaderfullbuying-while-expecting-to-sell-the-economic-psychology-of-online-resale 66

Finally the results of Study 2 con1047297rm that a mental evaluation process

about the bene1047297ts and costs of acquiring a product and not an

anchoring effect causes the observed effects of ERRPs and that the

failure of an expected resale may cause discon1047297rmation and thus

decrease purchase intention

6 Managerial implications

Our results imply that consumers who intend to resell online mayperceive lower purchase risk than those who intend only to buy They

are also more willing to purchase goods that they initially hesitated to

buy when they are aware that they can resell the goods they 1047297nd

unsatisfactory We suggest that marketers should consider the

changes brought about by the online secondary market in particular

the potential link between a new product and these secondary

markets (Purohit 1992 Zhao and Jagpal 2006) Whereas the

speculated cannibalization effect predicts that the C2C online auction

market may steal some sales from retailers the actions of online

auction sites that resell goods consumers do not want may actually

lead to increased sales of new products by retailers ( Paden and Stell

2005) Thus marketers should look favorably upon and implement

strategies to exploit secondary markets

7 Limitations and future research

Thepresent study has some limitations First all of the participants

were from the same online community in Taiwan More online and

of 1047298ine participants even persons from traditional secondary markets

should be tested to gain a deeper understanding of consumer pur-

chasing and resale behavior In addition we conducted the study in a

Chinese context and thus additional research is needed to investigate

consumer online resale behavior in other contexts As Chu and Liao

(2008) noted the product personal characteristics of the consumer

and situational factors can all in1047298uence consumer resale decisions

Thus future studies should include a wider range of products with

different characteristics participants with different levels of resale

experience and a variety of decision situations to further generalize

and con1047297rm the robustness of our 1047297ndings Finally ERRP is an im-portant factor that affects consumer online resale decisions Increas-

ing the number of different ERRP levels and enabling comparisons

among them could provide a more complete understanding of con-

sumer resale behavior The relationship between IRRPs and ERRPs as

well as how consumers determine resale prices is another potential

topic for further research

References

Baron RM Kenny DA The moderator-mediator variable distinction in social psycho-logical research conceptual strategic and statistical considerations J Pers SocPsychol 198651(6)1173ndash82

Belk RW Possessions and the extended self J Consum Res 198815(2)130ndash68Chandrashekaran R Grewal D Anchoring effects of advertised reference price and sale

price themoderatingrole of saving presentationformat J Bus Res200659(10ndash11)

1063ndash71Chu H Liao S Exploring consumer resale behavior in C2C online auctions taxonomy

and in1047298uences on consumer decisions Acad Mark Sci Rev 200711(3)1-27Chu H Liao S Toward a conceptual model of consumer online resale behavior an

exploratory study in Taiwan J Internet Commerce 20087(2)220ndash52Einhorn H Hogarth R Decision making under ambiguity J Bus 198659(4)225 ndash50Gourville JT Soman D Payment depreciation the behavioral effects of temporally

separating payments from consumption J Consum Res 199825(2)160ndash74Ha HH Hyun JS Pae JH Consumers mental accounting in response to unexpected price

savings at the point of sale Mark Intell Plann 200624(4)406ndash16

Heath C Fennema MG Mental depreciation and marginal decision making OrganBehav Hum Decis Process 199668(2)95-108

Heath C Soll JB Mental budgeting and consumer decisions J Consum Res 199623(1)40ndash52

Heath T Chatterjee S France K Mental accounting and changes in price the framedependence of reference dependence J Consum Res 199522(1)90ndash7

Herrmann GM Garage sales makes good neighbors building community throughneighborhood sales Hum Organ 200665(2)181ndash91

Herrmann GM Soiffer SM For fun and pro1047297t an analysis of the American garage saleUrban Life 198412(4)397ndash421

Kahneman D Tversky A Prospect theory an analysis of decision under risk

Econometrica 197947(2)263ndash

91Kahneman D Tversky A Choices value and frames Am Psychol 198339(4)341 ndash50Kalyanaram G Winer RS Empirical generalizations fromreference priceresearch Mark

Sci 199514(3)161ndash9Kamins MA Dreze X Folkes VS Effects of seller-supplied prices on buyers product

evaluationreferenceprices in an internet auction context J ConsumRes 200430(4)622ndash8

Kim HM The effect of salience on mental accounting how integration versus segrega-tion of payment in1047298uences purchase decisions J Behav Decis Making 200619(4)381ndash91

Kivetz R Advances in research on mental accounting and reason-based choice MarkLett 199910(3)249ndash66

Lattin JM Bucklin RE Reference effects of price and promotion on brand choicebehavior J Mark Res 198926(3)299ndash310

Lichtenstein DR Bearden WO An investigation of consumer evaluations of referenceprice discount claims J Bus Res 198817(2)189ndash200

Linville PW Fischer GW Preferences for separating or combining events J Pers SocPsychol 199160(1)5-23

Monroe KB Lee AY Remembering versus knowingissues in buyers processing of price

information J Acad Mark Sci 199927(2)207ndash25Moon S Voss G How do price range shoppers differ from reference price point

shoppers J Bus Res 200962(1)31ndash8Nunes J Boatwright P Incidental prices and their effect on willingness to pay J Mark

Res 200441(4)457ndash66Okada EM Trade-ins mental accounting and product replacement decisions J Consum

Res 200127(4)433ndash46Paden N Stell R Consumer product redistribution disposition decisions and channel

options J Mark Channels 200512(3)105ndash23Prelec D Loewenstein G The red and the black mental accounting of savings and debt

Mark Sci 199817(1)4-28Purohit D Exploring the relationship between the markets for new and used durable

goods the case of automobiles Mark Sci 199211(2)154ndash67Purohit D Playing theroleof buyerand seller the mental accounting oftrade-ins Mark

Lett 19956(2)101ndash10Rajendran KN Tellis GJ Contextual and temporal components of reference price J Mark

199458(1)22ndash34Sha1047297r E Simonson I Tversky A Reason-based choice Cognit 199349(12)11ndash36Sha1047297r E Thaler RH Invest now drink later spend never on the mental accounting of

delayed consumption J Econ Psychol 200627(5)694ndash712Sherry Jr JF A sociocultural analysis of a midwestern American 1047298ea market J Consum

Res 199017(1)13ndash30Strahilevitz MA Myers JG Donations to charity as purchase incentives how well they

work maydepend onwhatyou aretryingto sell J ConsumRes 199824(4)434ndash46Thaler RHTowardsa positivetheoryof consumerchoice J EconBehavOrgan19801(1)

39ndash60Thaler RH Mental accounting and consumer choice Mark Sci 19854(3)199ndash214Thaler RH Mental accounting matters J Behav Decis Making 199912(3)183ndash206Thaler RH Johnson EJ Gambling with the house money and trying to break even the

effects of prior outcomes on risky choice Manage Sci 199036(6)643ndash60Tversky A Kahneman D Judgment under uncertainty heuristics and biases Sci

1974185(4157)1124ndash31Tversky A Kahneman D The framing of decisions and the psychology of choice Sci

1981211(4481)453ndash8Tversky A Kahneman D Loss aversion in riskless choice a reference-dependent model

Quart J Econ 1991106(4)1039ndash61Urbany JE Bearden WO Weilbaker DC The effect of plausible and exaggerated refer-

ence prices on consumer perceptions and price search J Consum Res 198815(1)95-111

Winer RS A reference price model of brand choice for frequently purchased products J Consum Res 198613(2)250ndash6

Winer RS A multi-stage model of choice incorporating reference prices Mark Lett19891(1)27ndash36

Yam Survey (2006) httptaiwanyamorgtwsurvey Zhao H Jagpal S The effect of secondhand markets on the 1047297rms dynamic pricing and

new product introduction Int J Res Mark 200623(3)295ndash307

1078 H Chu S Liao Journal of Business Research 63 (2010) 1073ndash1078

8102019 Buying While Expecting to Sell the Economic Psychology of Online Resale

httpslidepdfcomreaderfullbuying-while-expecting-to-sell-the-economic-psychology-of-online-resale 66

Finally the results of Study 2 con1047297rm that a mental evaluation process

about the bene1047297ts and costs of acquiring a product and not an

anchoring effect causes the observed effects of ERRPs and that the

failure of an expected resale may cause discon1047297rmation and thus

decrease purchase intention

6 Managerial implications

Our results imply that consumers who intend to resell online mayperceive lower purchase risk than those who intend only to buy They

are also more willing to purchase goods that they initially hesitated to

buy when they are aware that they can resell the goods they 1047297nd

unsatisfactory We suggest that marketers should consider the

changes brought about by the online secondary market in particular

the potential link between a new product and these secondary

markets (Purohit 1992 Zhao and Jagpal 2006) Whereas the

speculated cannibalization effect predicts that the C2C online auction

market may steal some sales from retailers the actions of online

auction sites that resell goods consumers do not want may actually

lead to increased sales of new products by retailers ( Paden and Stell

2005) Thus marketers should look favorably upon and implement

strategies to exploit secondary markets

7 Limitations and future research

Thepresent study has some limitations First all of the participants

were from the same online community in Taiwan More online and

of 1047298ine participants even persons from traditional secondary markets

should be tested to gain a deeper understanding of consumer pur-

chasing and resale behavior In addition we conducted the study in a

Chinese context and thus additional research is needed to investigate

consumer online resale behavior in other contexts As Chu and Liao

(2008) noted the product personal characteristics of the consumer

and situational factors can all in1047298uence consumer resale decisions

Thus future studies should include a wider range of products with

different characteristics participants with different levels of resale

experience and a variety of decision situations to further generalize

and con1047297rm the robustness of our 1047297ndings Finally ERRP is an im-portant factor that affects consumer online resale decisions Increas-

ing the number of different ERRP levels and enabling comparisons

among them could provide a more complete understanding of con-

sumer resale behavior The relationship between IRRPs and ERRPs as

well as how consumers determine resale prices is another potential

topic for further research

References

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Belk RW Possessions and the extended self J Consum Res 198815(2)130ndash68Chandrashekaran R Grewal D Anchoring effects of advertised reference price and sale

price themoderatingrole of saving presentationformat J Bus Res200659(10ndash11)

1063ndash71Chu H Liao S Exploring consumer resale behavior in C2C online auctions taxonomy

and in1047298uences on consumer decisions Acad Mark Sci Rev 200711(3)1-27Chu H Liao S Toward a conceptual model of consumer online resale behavior an

exploratory study in Taiwan J Internet Commerce 20087(2)220ndash52Einhorn H Hogarth R Decision making under ambiguity J Bus 198659(4)225 ndash50Gourville JT Soman D Payment depreciation the behavioral effects of temporally

separating payments from consumption J Consum Res 199825(2)160ndash74Ha HH Hyun JS Pae JH Consumers mental accounting in response to unexpected price

savings at the point of sale Mark Intell Plann 200624(4)406ndash16

Heath C Fennema MG Mental depreciation and marginal decision making OrganBehav Hum Decis Process 199668(2)95-108

Heath C Soll JB Mental budgeting and consumer decisions J Consum Res 199623(1)40ndash52

Heath T Chatterjee S France K Mental accounting and changes in price the framedependence of reference dependence J Consum Res 199522(1)90ndash7

Herrmann GM Garage sales makes good neighbors building community throughneighborhood sales Hum Organ 200665(2)181ndash91

Herrmann GM Soiffer SM For fun and pro1047297t an analysis of the American garage saleUrban Life 198412(4)397ndash421

Kahneman D Tversky A Prospect theory an analysis of decision under risk

Econometrica 197947(2)263ndash

91Kahneman D Tversky A Choices value and frames Am Psychol 198339(4)341 ndash50Kalyanaram G Winer RS Empirical generalizations fromreference priceresearch Mark

Sci 199514(3)161ndash9Kamins MA Dreze X Folkes VS Effects of seller-supplied prices on buyers product

evaluationreferenceprices in an internet auction context J ConsumRes 200430(4)622ndash8

Kim HM The effect of salience on mental accounting how integration versus segrega-tion of payment in1047298uences purchase decisions J Behav Decis Making 200619(4)381ndash91

Kivetz R Advances in research on mental accounting and reason-based choice MarkLett 199910(3)249ndash66

Lattin JM Bucklin RE Reference effects of price and promotion on brand choicebehavior J Mark Res 198926(3)299ndash310

Lichtenstein DR Bearden WO An investigation of consumer evaluations of referenceprice discount claims J Bus Res 198817(2)189ndash200

Linville PW Fischer GW Preferences for separating or combining events J Pers SocPsychol 199160(1)5-23

Monroe KB Lee AY Remembering versus knowingissues in buyers processing of price

information J Acad Mark Sci 199927(2)207ndash25Moon S Voss G How do price range shoppers differ from reference price point

shoppers J Bus Res 200962(1)31ndash8Nunes J Boatwright P Incidental prices and their effect on willingness to pay J Mark

Res 200441(4)457ndash66Okada EM Trade-ins mental accounting and product replacement decisions J Consum

Res 200127(4)433ndash46Paden N Stell R Consumer product redistribution disposition decisions and channel

options J Mark Channels 200512(3)105ndash23Prelec D Loewenstein G The red and the black mental accounting of savings and debt

Mark Sci 199817(1)4-28Purohit D Exploring the relationship between the markets for new and used durable

goods the case of automobiles Mark Sci 199211(2)154ndash67Purohit D Playing theroleof buyerand seller the mental accounting oftrade-ins Mark

Lett 19956(2)101ndash10Rajendran KN Tellis GJ Contextual and temporal components of reference price J Mark

199458(1)22ndash34Sha1047297r E Simonson I Tversky A Reason-based choice Cognit 199349(12)11ndash36Sha1047297r E Thaler RH Invest now drink later spend never on the mental accounting of

delayed consumption J Econ Psychol 200627(5)694ndash712Sherry Jr JF A sociocultural analysis of a midwestern American 1047298ea market J Consum

Res 199017(1)13ndash30Strahilevitz MA Myers JG Donations to charity as purchase incentives how well they

work maydepend onwhatyou aretryingto sell J ConsumRes 199824(4)434ndash46Thaler RHTowardsa positivetheoryof consumerchoice J EconBehavOrgan19801(1)

39ndash60Thaler RH Mental accounting and consumer choice Mark Sci 19854(3)199ndash214Thaler RH Mental accounting matters J Behav Decis Making 199912(3)183ndash206Thaler RH Johnson EJ Gambling with the house money and trying to break even the

effects of prior outcomes on risky choice Manage Sci 199036(6)643ndash60Tversky A Kahneman D Judgment under uncertainty heuristics and biases Sci

1974185(4157)1124ndash31Tversky A Kahneman D The framing of decisions and the psychology of choice Sci

1981211(4481)453ndash8Tversky A Kahneman D Loss aversion in riskless choice a reference-dependent model

Quart J Econ 1991106(4)1039ndash61Urbany JE Bearden WO Weilbaker DC The effect of plausible and exaggerated refer-

ence prices on consumer perceptions and price search J Consum Res 198815(1)95-111

Winer RS A reference price model of brand choice for frequently purchased products J Consum Res 198613(2)250ndash6

Winer RS A multi-stage model of choice incorporating reference prices Mark Lett19891(1)27ndash36

Yam Survey (2006) httptaiwanyamorgtwsurvey Zhao H Jagpal S The effect of secondhand markets on the 1047297rms dynamic pricing and

new product introduction Int J Res Mark 200623(3)295ndash307

1078 H Chu S Liao Journal of Business Research 63 (2010) 1073ndash1078