New product pricing strategy under customer asymmetric anchoring

Potential customers' willingness to pay (WTP) for a new product can be affected by their observing a posted price and this can be modeled in terms of an anchoring mechanism. A theoretical argument and mathematical proof are developed, showing that if customers use an asymmetric WTP anchoring mechanism, it will normally be optimal for firms to price higher than otherwise. Experimental evidence is provided supporting the notion that an asymmetric anchoring mechanism can be involved in purchase decisions.

► Observing a posted price can affect potential customers’ willingness to pay (WTP).
► This can be modeled as an anchoring mechanism.
► If customers use an asymmetric anchoring mechanism, firms should price higher.
► Experiment indicates that customers employ an asymmetric anchoring mechanism.