CPP Psychology of Pricing 3

Question 1

A gym offers a 'free first month' promotion. After cancellation rates spike in month two, what psychological concept explains why members may feel they already got their value?

Accepted Answer

Mental accounting and sunk cost

Answer

Mental accounting leads consumers to categorize the free month as 'prepaid value already received,' reducing perceived cost of canceling.

Question 2

Consumers perceive a $10 discount on a $25 item as more attractive than a $10 discount on a $250 item, even though the dollar savings are identical. This is explained by:

Accepted Answer

Weber's Law / proportional discounting

Answer

Weber's Law predicts that perceived value is relative to the base price; 40% off $25 is far more salient than 4% off $250.

Question 3

Which of the following best describes the 'decoy effect' in pricing?

Accepted Answer

Adding an inferior third option to make a target option seem superior

Answer

The decoy (asymmetrically dominated) option is deliberately inferior to one choice but not the other, steering consumers toward the preferred target.

Question 4

A car dealership advertises monthly payments of $299 instead of the total price of $17,940. This tactic exploits:

Accepted Answer

Payment segregation / temporal discounting

Answer

Breaking the total into smaller periodic payments reduces the perceived magnitude of the expenditure through temporal discounting and unit bias.

Question 5

A consumer who paid $500 for a non-refundable concert ticket attends despite feeling ill because 'I already paid.' This behavior exemplifies:

Accepted Answer

Sunk cost fallacy

Answer

The sunk cost fallacy causes people to factor in irrecoverable past costs when making current decisions, even though those costs are economically irrelevant.

(CPP) Certified Pricing Professional Practice Test

(CPP) Certified Pricing Professional Practice Test

CPP Psychology of Pricing 3