Why expect lower prices online? Empirical examination in online and store-based retailers

This study extends prior research by examining consumer expectations regarding the lower price of products found in online shopping stores and considers the role of overhead cost in consumer decision-making. By using a laboratory experiment method, we verified the difference in the perceived overhead cost between the two types of retailers and the relationship between perceived overhead cost and internal reference pricing. This study involved 123 subjects. The findings show that consumers perceive online retailers' overhead costs as lower than store-based retailers' overhead costs and that lower perceived overhead prices cause consumers to have lower internal reference prices. This study supplements e-commerce research, can assist retailers in understanding consumers' perceptions of overhead cost and product prices, and serves as a reference for online retailers attempting to create pricing strategies.