When Budgeting Backfires: How Self-Imposed Price Restraints Can Increase Spending

Keywords

budgets, consumer spending, price restraints, quality perceptions, consideration sets

Abstract

A common strategy for controlling spending is to impose a price restraint on oneself. For example, a consumer who is concerned with limiting expenses may decide before going shopping that he or she only wants to spend approximately $100 for a particular purchase. Although conventional wisdom predicts that self-imposed price restraints will decrease consumer spending, the authors show that salient price restraints can actually increase consumers' preferences for high-priced, high-quality items. The authors propose that making a price restraint salient has the effect of partitioning consumers' evaluations of price and quality, leading to larger differences in perceived quality between options and a greater focus on quality during the final decision. Thus, while budgets and other types of price restraints can limit spending by eliminating some high-priced options from consideration, this research suggests that they can also have the ironic effect of increasing consumers' spending relative to a situation in which consumers have not imposed a price restraint.

Original Publication Citation

Larson, Jeffrey S. and Ryan P. Hamilton (2012). When Budgeting Backfires: How Price Restraints Can Increase Spending. Journal of Marketing Research, 49 (2), 231-246.

Document Type

Peer-Reviewed Article

Publication Date

2012

Publisher

Journal of Marketing Research

Language

English

College

Marriott School of Business

Department

Marketing

University Standing at Time of Publication

Associate Professor

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