Interactive effect of advertisement and decision environment on consumer mental model considering price and set size sensitivity

elasticity in an indicator of price sensitivity and its psychological basis has largely been neglected. some scholars in consumer psychology show that advertising decreases price elasticity، while others found a positive relationship between advertising and price elasticity. We hypothesize that two psychological variables، namely set size (in memory) and relative strength of preference (constructed via discriminative stimulus) play a significant role in this relashionship. 192 undergraduate psychology and educational sciences students participated in the experiment and purchased 12 brands in a mixed factorial design، with decision environment and advertising condition as between-subject factors. Shopping trips were used as a device for constructing decision environment (for treatment). Findings indicate that advertising affect price sensitivity through two routes، namely set size and relative strength of preference. It appears that the former increase price elasticity، wheras cues related to the latter that decrease price elasticity. This experiment offers a possible solution to the controversial dilemma of the role of advertising on price elasticity by suggesting a reconciliation between two competing theory. In the stimulus-based decision environment in which the effect of advertising on brand recall for consideration was neutralized، so advertising decrease price elasticity contrary to memory-based environment.