The Influence of Payment Mechanisms on Pricing: When Mental Imagery Stimulates Desire for Money

Abstract The present research investigates how differences in payment mechanisms, and between cash and e-payments, in particular, influence sellers’ pricing behavior. Extant finance literature predicts that cash payments prompt price discounts, yet the present research demonstrates that compared with e-payments, cash payments facilitate mental imagery processes, which increase people’s desire for money and induce higher sales prices. In a series of five experiments, we establish a basic effect of payment mechanisms on pricing (Studies 1a and 1b), then provide evidence that mental imagery and desire for money underlie the effects (Studies 2 and 3). Yet these effects emerge only when consumers focus cognitively on the prospective financial gain, not when they focus on the forgone object (Study 4). We in turn offers both theoretical insights and managerial implications.