CPM Price Psychology & Behavioral Economics Flashcards

Charm pricing (e.g., $9.99 instead of $10.00) leverages which cognitive bias?

Answer: Left-digit anchoring

Consumers disproportionately encode the left-most digit of a price, making $9.99 feel significantly cheaper than $10.00.

The decoy effect in pricing involves adding a third option primarily to:

Answer: Make the target option appear more attractive by comparison

An asymmetrically dominated decoy shifts preference toward the target option by making it look superior to the decoy.

Prospect theory suggests buyers are more motivated by:

Answer: Avoiding losses than acquiring equivalent gains

Kahneman and Tversky showed that the pain of losing $100 is psychologically stronger than the pleasure of gaining $100.

When a retailer sets a high 'original' price and then offers a discount, this exploits which pricing psychology principle?

Answer: Price anchoring

The high original price serves as an anchor, making the discounted price seem like a greater bargain than it may objectively be.

Which framing approach typically generates higher willingness to pay for an upgrade?

Answer: 'Upgrade for only $5/month more' vs. 'Upgrade costs $60/year'

Presenting the incremental cost in a smaller time unit (monthly) reduces perceived outlay versus the larger annual equivalent.

The 'pain of paying' concept in behavioral pricing suggests cash transactions lead to:

Answer: Greater purchase reluctance than card or digital payments

Physical cash feels more 'real,' triggering stronger loss aversion than abstract card or digital payments.