Using a discrete choice model to identify consumer meal preferences within a prix fixe menu

Reference price theory suggests that consumers create a point of reference for pricing based on multiple factors. A point of reference in turn influences how buyers respond to price. Several studies (e.g., Yadav & Monroe, 1993) examined reference price theory in the bundling context. These studies state that consumers form perceptions of value by comparing the bundle price and the sum of individual prices. These perceptions of value are then directly related to preference or choice; the larger a buyer\u27s perception of value, the more likely the buyer will be to express a preference for the product; Therefore, the objective of this dissertation is to test the reference price theory by examining whether or not the presence of different a la carte item prices along with a bundle price influences consumers\u27 meal choice decisions; The conjoint analysis with a rank-ordered logit model was used to estimate utility functions. We also estimated a conditional logit model to compare top choice with full rank; An actual menu from a restaurant that offers prix fixe menus was used to generate attributes. Each attribute had two price levels, and these were randomized to measure true price influences on meal selection while controlling other factors; A face-to-face survey was conducted with the general population in a popular tourist attraction in the Southwest. The final 401 surveys were used for data analysis; We found that the estimates of both a rank-ordered logit model and a conditional logit model provided similar results; overall, there was clear evidence that the price difference among a la carte items influenced consumer bundle (i.e., prix fixe menu) choice decisions; The results indicate that people are more likely to choose highly-priced appetizer items and entree items for their prix fixe menus. This is consistent with our hypotheses (H1 and H2) and reference price theory. Furthermore, the results show that consumers have larger utilities with lower bundle prices than with higher ones, supporting the findings of previous studies that a consumer perceives more value from a bundle that provides higher savings than on providing lower savings