| Abstract: | Many new purchases involve consumers trading in their old product at the same time, requiring them to assume the dual role of a buyer and a seller in the overall exchange. This research examines how framing the overall exchange as a partitioned transaction with separate prices for the new purchase and the trade-in, or a consolidated transaction with a single net price after accounting for the trade-in price, affects consumer preferences. We find that consumers prefer a partitioned (consolidated) transaction when the relative trade-in price is high (low). Unlike previous explanations based on heuristic processing and differential importance of the trade-in price, our reasoning is that partitioning (vs. consolidating) prices makes salient and enables evaluability of the trade-in price. In the absence of specific referents, consumers rely on the new purchase price to evaluate the merits of the trade-in price. Consistent with our reasoning, we identify boundary conditions for the findings. The presence of a favorable referent for the trade-in and whether the new purchase and the trade-in are (perceived to be) in the same product category attenuate the reliance on the new purchase price as a referent. Our findings have important theoretical and managerial implications. |
