The locus effect on inertia equity

Author: Ye, Gewei

Source: Journal of Product and Brand Management, Volume 14, Number 3, 2005 , pp. 206-210(5)

Publisher: Emerald Group Publishing Limited

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Abstract:

Purpose - The paper attempts to answer "Will the shift from the locus of self to locus of others impact the magnitude of loss aversion?" and "Will different prices affect the self-other asymmetry in choice?". Design/methodology/approach - The design is a two (locus: self vs others) by two (anchoring price: $30 vs $90) between-subjects' factorial with both the locus of evaluation and the monthly service plan charges (anchoring prices) as the between-subjects' factors. Findings - The author finds that inertia equity is smaller when consumers evaluate peer customers than when they evaluate themselves to switch brands. It is also found that the locus effect is applicable to brands at various prices. Research limitations/implications - Further research should focus on the validations of the assumptions to support the empirical finding from the theoretical perspective. Practical implications - Price reductions should be made personally relevant to the consumer and price increases should be made relevant to other things. Originality/value - The locus effect expands the assessment of loss aversion from one (self or other) to two dimensions jointly (self and other). It demonstrates the impact of the locus of evaluation on the magnitude of loss aversion.

Keywords: Prices; Perception; Loss Aversion; Brand Loyalty

Document Type: Research article

DOI: http://dx.doi.org/10.1108/10610420510601076

Publication date: 2005-03-01