Effects of purchase and presentation order on the valuation of physical and digital good bundles

Abstract

Many digital goods also come on physical mediums, such as movies and games on discs. We investigate how the order of purchase (buying a digital copy of a good already owned in physical form or vice versa) and order of presentation (considering one form of the good and then a bundle of both) can affect consumer valuations of the second purchase and bundles containing both physical and digital goods. Using a series of experiments, we show that (a) physical goods are more valuable than digital goods, (b) consumers who own digital (physical) goods are more (less) willing to purchase a second, physical (digital) copy of the same good, and (c) presenting consumers a digital product for consideration first can lead to lower willingness to pay for a bundle containing both physical and digital forms of the good. Internalized reference prices and the anchoring and adjustment heuristic are used to explain these results.