European Journal of Marketing

Influence of consumer online resale awareness on purchase decisions: a mental accounting perspective
Shuling Liao Hsunchi Chu
Article information:
To cite this document:
Shuling Liao Hsunchi Chu , (2013),"Influence of consumer online resale awareness on purchase decisions: a mental
accounting perspective", European Journal of Marketing, Vol. 47 Iss 10 pp. 1576 - 1597
Permanent link to this document:
http://dx.doi.org/10.1108/EJM-12-2010-0665
Downloaded on: 31 January 2016, At: 14:19 (PT)
References: this document contains references to 29 other documents.
To copy this document: permissions@emeraldinsight.com
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

The fulltext of this document has been downloaded 2054 times since 2013*
Users who downloaded this article also downloaded:
Jacob Weisberg, Dov Te'eni, Limor Arman, (2011),"Past purchase and intention to purchase in e-commerce: The mediation
of social presence and trust", Internet Research, Vol. 21 Iss 1 pp. 82-96 http://dx.doi.org/10.1108/10662241111104893
Echo Huang, (2012),"Online experiences and virtual goods purchase intention", Internet Research, Vol. 22 Iss 3 pp.
252-274 http://dx.doi.org/10.1108/10662241211235644
Hee Yeon Kim, Jae-Eun Chung, (2011),"Consumer purchase intention for organic personal care products", Journal of
Consumer Marketing, Vol. 28 Iss 1 pp. 40-47 http://dx.doi.org/10.1108/07363761111101930

Access to this document was granted through an Emerald subscription provided by emerald-srm:210680 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service
information about how to choose which publication to write for and submission guidelines are available for all. Please
visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of
more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online
products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication
Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.

*Related content and download information correct at time of download.


EJM
47,10
1576
Received 27 December 2010
Revised 14 July 2011
7 January 2012
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)
Accepted 30 March 2012
European Journal of Marketing
Vol. 47 No. 10, 2013
pp. 1576-1597
q Emerald Group Publishing Limited
0309-0566
DOI 10.1108/EJM-12-2010-0665
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0309-0566.htm
Influence of consumer online resale
awareness on purchase decisions:
a mental accounting perspective
Shuling Liao
Division of Marketing, College of Management, Yuan Ze University,
Chung-li City, Taiwan, Republic of China, and
Hsunchi Chu
Commerce Development Research Institute, Taipei City, Taiwan, Republic of China
Abstract
Purpose – Consumer online resale is becoming an increasingly common method of both buying and
selling goods. When an item can be easily resold online, consumers’ subjective estimation of the value
of that item changes in complex ways based on consumption cost and resale return. This in turn can
affect consumers’ decisions to purchase new products. The authors aim to apply the principles of
mental accounting to investigate how consumers’ economic psychology associated with buying a new
product is affected when an awareness of the possibility of online resale is aroused.
Design/methodology/approach – Three studies with between-subjects designs were conducted
online to examine the effects of consumer awareness of a resaleable item on purchase intention of a
new item under different situations.
Findings – The results indicate that: consumers’ awareness of the resale value of an already
possessed product can influence their decision to purchase a new product; and when the product to be
resold is the same type as the desired new item (e.g. an old idle mobile phone and a new mobile phone),
the influence of resale awareness on purchase intention is greater than when the two items are distinct
types but share similar functions and therefore could be categorized in the same mental account in
terms of budget planning (e.g. an old idle digital camera and a new mobile phone) and when the
short-used new product to be resold is exactly the same one to be purchased (e.g. buy and resell the
same new mobile phone shortly after purchase).
Research limitations/implications – The participants were all from a single Taiwanese online
community. More and a greater variety of participants (e.g. both online and offline consumers, even those
from traditional secondhand markets) should be included in future studies to gain a better understanding
of consumer purchasing and resale behavior. Although the authors’ studies are relatively theory-driven,
the findings might be subject to cultural difference in the online resale environment.
Practical implications – Consumers prefer to dispose of items in their homes and that this elevates
the purchase intention for new products. Thus, marketers should look favorably upon and implement
strategies to exploit secondary markets.
Originality/value – By notifying consumers of the future chance to resell a good, the awareness and
expectation for an online resale could be prompted, which in turn enhances the intention to purchase a
new good. Therefore, the authors suggest that online resale awareness and expectation are important
factors affecting consumers’ purchasing and reselling behaviors.
Keywords Consumer behaviour, Internet, E-commerce, Personal selling
Paper type Research paper
This work was supported in part by the National Science Council under Grant No.
NSC97-2410-H-155-023.
 Introduction Consumer online
In consumer-to-consumer (C2C) e-commerce, a consumer can post an item for sale and resale awareness
other consumers can bid to purchase it. Yet when a consumer acts as a reseller, he or
she no longer engages in the traditional behavior of merely purchasing and consuming.
How consumers’ thoughts about resale might affect their intention to purchase a
product is an interesting area of research. Consider the following scenario: you are
contemplating buying a new and highly functional mountain bike, and a family 1577
member reminds you of your old but decent bike that has not been ridden for a long
while. Even though you do not like this older model any more, your family member is
confident that it can sell for $US200 on eBay. Under these circumstances, would you be
more likely to purchase a new bike, knowing that your old bike could be resold?
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

Although the consumer online resale market is booming, knowledge about

consumer reselling behavior and its influences on purchasing remains primitive (Chu
and Liao, 2007, 2010). Previous studies on consumer behavior have generally focused
on initial purchases. Much less is known about the role of resale, in particular that of
online resale; most studies that have considered resale have done so in the context of
community flea markets (McCrohan et al., 1991) and other face-to-face selling
environments such as garage sales (Herrmann, 2006). Online resale could be quite
different from conventional secondary retail because today’s technology has altered
the scale and scope of the sale of used goods and has enabled buyers and sellers to
locate and trade goods more efficiently (Ghose et al., 2005).
The selling of personal goods is not new; it has been around for as long as there
have been physical secondary markets. In contrast to retailers, who sell to make a
profit, consumer sellers resell for a wide variety of reasons, from periodic
housecleaning and socializing to making a profit and generating cash (Herrmann
and Soiffer, 1984). Herrmann (1997) found that garage sales in the USA frequently
function as social gatherings where personal belongings are bought and sold. These
transactions are more about socializing than making a cash profit. Recently, social
shopping and social commerce websites have gained the attention of scholars. The
terms “social shopping” and “social commerce” are broadly used to refer to online
commerce that supports social interaction and encourages users to contribute to the
online buying and selling of products. Whereas social shopping connects buyers, social
commerce connects consumer sellers (Stephen and Toubia, 2010). According to this
definition, C2C auction websites cater to both social shopping and social commerce,
enabling users to interact with feedback mechanisms and community functions and
connecting buyers and consumer resellers in real time. Previous research on social
shopping has mainly focused on online word-of-mouth marketing, examining how
consumer activities ranging from creating webpage contents to rating and
recommending products influence buyers’ decisions (Stephen and Toubia, 2010).
Consumer sellers may show their attitudes toward an item through the resale activities
of listing and pricing (Chu and Liao, 2007). This user-generated information could
influence buyers’ decisions to purchase a product online.
Consumer online resale is somewhat different from online retailing, in that
consumers initially purchase goods for self-use (not with the sole intention to resell
them). To our knowledge, the first study to focus on consumer online resale was
conducted by Chu and Liao (2007). In this conceptual research, the authors defined
consumer online resale as an online resale in which the products being resold were
 EJM purchased mainly for self-use, not for resale (p. 6), and categorized consumer online
47,10 resale into planned and unplanned resale. A planned resale occurs when consumers,
before purchasing an item, intend to resell the target product after using it for a certain
time and believe that they may be compensated if the item is successfully resold. An
unplanned resale occurs when consumers incidentally intend to resell a product only
after (not before) having acquired it. The authors proposed that the different types of
1578 resale are associated with different motivations and thus could lead to different
consumer purchase and resale decisions. Furthermore, Chu and Liao (2008) suggested
that the characteristics of the product, the characteristics of the seller, and situational
factors could predetermine the type of consumer resale; they also linked these factors to
other types of consumer resale, including resale of extra purchase, resale after
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

temporary ownership, unintentional resale and disposition. A survey implemented in

this study showed the frequency and prevalence of each type of C2C resale, providing
directions for further study.
Once a consumer decides to resell an item prior to purchasing it, how the item can be
resold becomes a major concern that may predetermine the consumer’s evaluation of
that item and his or her willingness to buy the item (Chu and Liao, 2007, 2008). In this
case the purchase combines the purposes of personal use and future business. A
number of studies have empirically examined consumer behavior in planned resales.
For example, Chu and Liao (2010) found that consumers’ awareness of the future online
resale potential of a product influenced their decision to purchase the product. Among
consumers with online resale awareness, the higher the external resale reference price
of a good, the greater their intention to purchase the good.
However, the effect of resale awareness remains unknown when the resalable target
is a possessed item instead of a brand new item, just like in the bike example at the
beginning of this article. According to Chu and Liao (2008), consumer resale of
possessed goods occurs much more often than planned resales of new items,
accounting for 89.6 percent of resale on C2C websites. As consumers tend to link the
resale of a possession to the purchase of a new product, it is worth investigating how
their purchase intention may be affected by resale decisions.
The consumer as an online reseller is a relatively new phenomenon. Reselling
involves assessing the value of a resalable item and taking a mental accounting of the
amount paid (or to be paid) for an item and the income received from reselling it.
Mental accounting principles (Thaler, 1985) are widely used to determine how people
evaluate multiple events (e.g. buying and reselling in our studies) and maximize the
utility of a decision. We thus apply this theory to explain how a consumer’s purchase
intention changes as he or she compares the cost and resale return of a possessed item
against its resale price.
Here we describe three different studies. We first investigate how purchase
intention is influenced when the item to be purchased and the resalable possession are
similar or different products in an unplanned resale and then compare these results to
those of a planned resale (when the new product becomes the resale item). In Study 1,
we examine the effect of resale awareness of a possessed good on the intention to
purchase a new product when the product to be resold is the same type as the desired
new item (i.e. an older mobile phone and a newer version of the same mobile phone). In
Study 2, we consider products that are different but that share similar functions and
therefore could be categorized in a fungible account in terms of budget planning (i.e. an
 older digital camera and a new mobile phone) and compare these results to those of Consumer online
Study 1. Study 3 replicates Chu and Liao’s (2010) experiment on planned resale to resale awareness
examine the effect of resale awareness on purchase intention when the products being
bought and sold are exactly the same (i.e. the same new mobile phone), and again we
compare these results with those of Study 1.

Study 1 1579
Theoretical foundation and hypotheses
Thaler (1985), drawing on prospect theory (Kahneman and Tversky, 1979, 1983),
proposed the “mental accounting” concept to describe how people mentally code,
categorize, and evaluate multiple events to maximize utility. For example, one seller
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

buys a bike for $1,000 and sells it for $1,300. If these two events are categorized in the
same mental account, the seller will experience the two events as a net gain of $300. If
the events are categorized in separate mental accounts, the dealer will experience a loss
of $1,000 and a gain of $1,300. Consider two monetary outcomes (X, Y), X . 0, Y . 0.
One can jointly value the two events as an integration of vðX þ Y Þ, or separately store
them in different mental accounts as vðXÞ þ vðY Þ, where v is a value function.
Determined by the magnitude and sign of the two events, X and Y, four mental
accounting principles are posited to explain how individuals mentally integrate or
separate multiple events (Thaler, 1985):
(1) multiple gains (X, Y);
(2) mixed gains (X, 2 Y), where X . Y ;
(3) multiple losses (2X, 2 Y); and
(4) mixed losses (X, 2 Y), where X , Y .
According to the mental accounting framework, a person has the tendency to segregate
multiple gains and mixed losses, and to integrate multiple losses and mixed gains (see
Thaler, 1980, 1985). All of these mechanisms of mental accounting are supported
empirically (Gourville and Soman, 1998), although the principle of multiple losses
integration is considered less robust (Kim, 2006).
In the mental accounting concepts, people first integrate or separate factors or
events and then evaluate them subjectively, based on what brings them the most
pleasure (Thaler, 1985). Under the “hedonic editing” principle, consumers may
categorize expenses, establish budgets for each category (i.e. partition their resources)
and mentally depreciate the cost of a good over time (Heath and Soll, 1996). Consumers
may compare the costs and benefits of a purchase by imagining and evaluating future
consumption, and in doing so lower the perceived “loss” of a given expense (Heath and
Fennema, 1996). They may keep mental “book values” for purchases and update the
values over time (Heath and Fennema, 1996). Therefore, when a future purchase is
made to replace a possessed product, the consumer pays a subjective price that is equal
to this remaining mental book value, in addition to the actual price (Okada, 2001).
When consumers consider buying a new item, their purchase intention is affected
not only by the new product’s marginal benefit and paid marginal cost, but also by the
possibility to “write off” the mental book value of old products (Okada, 2001). This
would suggest that consumers may choose not to purchase new products because their
old items are still usable and leaving such items idle after buying a replacement makes
them uncomfortable (Arkes and Blumer, 1985; Chu and Liao, 2010), not because they do
 EJM not have sufficient funds. Therefore, if consumers can find a convenient way to sell
47,10 their old possessions, they should be able to legitimize the purchase of new products
more easily (Chu and Liao, 2007, 2008). In this context, the resale of used products
through the internet can be viewed as a convenient way of writing off the mental book
value of products, thereby lowering the sense of waste caused by not using the usable
idle product (Chu and Liao, 2010). This effect is similar to trade-in promotions, a kind of
1580 promotion offered by marketers that allows consumers to apply a certain portion of the
value of an old product to new purchases (Chu and Liao, 2010). If consumers can gain a
profit by selling used possessions via the internet, they may be more likely to spend the
unexpected income recouped from items that are otherwise sitting idle at home (Chu
and Liao, 2008). Therefore, consumers with high resale awareness compared to those
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

with low awareness will assign more mental book value to future purchases, which
may influence their purchasing decisions and lead to higher purchase intention for new
items (Chu and Liao, 2007, 2008).
As alluded to above, a payment for an item can be considered a loss; in the same
way, the use of a product can be considered a benefit, or gain (Chu and Liao, 2010;
Thaler, 1999). When the loss of (value of cash exchanged for) purchasing a product is
greater than the benefit of (value of owning) the product, a consumer will have a lower
purchase intention because the purchase results in a net loss (Chu and Liao, 2010;
Okada 2001). Imagine that a consumer already owns a product similar to another under
consideration, for example the same type of product discussed in this study. When
he/she is aware of the possibility of making money by reselling the old item, the item
would have a mental book value. If the value is sufficiently high, it may offset the loss
incurred from paying for the new item and thereby reverse or neutralize his or her
purchase intention. In this case, a buyer can eliminate or reduce the expense of a
purchase (“loss”) by combining the subjective evaluations of purchase and resale
potential (Heath and Fennema, 1996). As people are loss-averse (Kahneman and
Tversky, 1979), they are generally more satisfied if they can combine a loss with an
equal or greater gain (Thaler, 1985).
Under the above circumstances, it will be easier to stimulate a desire to buy among
consumers with high online resale awareness than among those with low awareness,
as high-awareness consumers will take the resale cash into account (Chu and Liao,
2007, 2008). In this way, a resale plan makes more brands affordable and tempting.
This reasoning leads to the following hypothesis:
H1.1. Prior to a purchase, consumers who are highly aware of the possibility of
reselling a possessed product that is of the same type as the desired new
product will have a greater purchase intention than those with low online
resale awareness.
Consumers are reported to be concerned about the mental book value of a reusable item
and are able to estimate it mentally (Chu and Liao, 2010; Okada, 2001). The resale price
potential should be an important factor affecting the estimated cost of purchasing a
new item, assuming that resale awareness is formed prior to the purchase and
consumers mentally integrate the events of purchase and resale (Chu and Liao, 2010).
Yet, only when the resale price is high enough can individuals practice mixed gain by
covering a small loss with a larger gain (Chu and Liao, 2010; Thaler, 1985). To
formulate these concepts according to the prospect theory, let us consider three events,
 i.e. (X, Y, Z), X . 0, Y . 0, Z . 0, where X is the benefit of owning new product A and Consumer online
v(X) is the value of owning it; Y is the cost of purchasing the item and v(Y) is the value
of the cash exchanged for its purchase; and Z is the price at which a possessed good,
resale awareness
item B, can be resold online and v(Z) is the value of reselling the item at a price of Z. The
higher the expected resale price of the possessed item, the more return of Z the
consumer can expect to receive, or the higher the net gain from integrating the three
events, vðX 2 Y þ Z Þ, where X 2 Y þ Z . 0. Normally a resale price is positively 1581
linked to the market resale reference price. Therefore:
H1.2. Among consumers with high online resale awareness, the higher the resale
reference price of a possessed product that is the same type as the desired new
product, the greater the purchase intention for the new product.
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

Scholars investigate how consumption may be mentally separated or temporally

decoupled from purchase (Gourville and Soman, 1998; Shafir and Thaler, 2006). They
suggest that goods are assessed using multiple frames and alternative accounting
schemes, and sometimes are coded mentally as incurring no cost or even as savings.
Shafir and Thaler (2006) found that the value of items can change for a variety of
reasons, including depreciation, appreciation, market valuation, the cost of money, and
personal taste.
Based on these findings, if consumers buy products with no resale plan, but
eventually do sell them at a later date, they may consider the resale earnings an
unexpected income. However, whether the amount of such unexpected income will
satisfy the reseller depends on how he or she believes the resale price is reasonable
after considering various factors. When new and old products have the same
functionality (i.e. both products are of the same type, for example mobile phones),
consumers tend to convert the estimated resale income from an old item into the
available funds for purchasing a new one, and the transaction is mentally accounted as
being similar to a trade-in.
In this situation, a higher resale reference price leads to a greater estimated resale
return, and would be a more compelling reason and a mediator for buying. Here resale
reference price is an objective, external reference to the return value of reselling a
product, whereas the estimated resale return is a subjective estimation of the possible
return. The estimated resale return may itself be influenced by external and internal
factors, such as sellers’ resale skill and knowledge, pricing strategy, product condition,
auction site’s charge and buyer’s willingness to pay (Chu and Liao, 2008); hence, the
estimated resale return does not necessarily equal to the resale reference price. Hence:
H1.3. The estimated resale return of a currently owned product that is the same
type as the desired new product will mediate the relationship between resale
reference price and purchase intention.
A higher resale reference price indicates that a possessed item has a higher residual
value after use. This value can be considered another form of cash possessed by the
owner; that is, a portion of the previous payment is considered inherent to or “stored
value” in the possessed merchandise ready for redemption in resale, which thus
decreases the perceived purchase payment for a new item (Chu and Liao, 2010). We
propose that the perceived purchase payment is also a subjective estimation and
therefore not always equals to the resale price. This can be illustrated by the value
function v½X 2 ðY 2 Z Þ
, where X 2 ðY 2 Z Þ . 0. With the same benefits, X,
 EJM consumers prefer a higher Z and a lower cost, Y 2 Z . Although a higher resale price
47,10 will increase purchase intention, a lower payment perception may determine likewise.
Therefore:
H1.4. The perceived purchase payment will mediate the relationship between the
resale reference price of a possessed product and purchase intention.
1582 Method
A between-subjects experiment involving a hypothetical resale and purchase of a
mobile phone was conducted. Participants were members of Youthwant (see www.
youtheant.com.tw), the largest online community in Taiwan. This popular site targets
youth and provides a variety of services, including online shopping, online games,
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

online storage, and online surveys. We used this site to conduct the study, uploaded the
experiment to the survey platform, and purchased advertisements inviting interested
members to participate in the study. Members of Youthwant simply clicked on the
advertisements, read the scenario to answer the questionnaire, and collected virtual
points in exchange. This online study posting is superior to e-mail delivery for many
reasons. First, the respondents are active participants in Youthwant, and the fact that
they can immediately receive rewards may make them more willing to respond.
Second, this website provides various images, animations, and links to other
self-designed pages to enable the construction of more advanced questionnaires. Third,
the system uses several quality control measures; to ensure that participants respond
truthfully and thoughtfully, researchers can build check items into questions that
require standardized answers.
Mobile phones were selected because they are the best-selling product in online
auctions in the country where the experiment was conducted (Yam Survey, 2010). We
chose the newest, most-traded phone model and set its initial price at $NT10,000 based
on a market price survey (approximately $US312; hereafter, all values are expressed in
NT unless otherwise noted).
The independent variables were online resale awareness (low or high) and the resale
price of the currently owned item (low, medium, or high); resale price was manipulated
only in the high-awareness group. Participants in the low resale awareness condition
were told to imagine that they had an old mobile phone at home and were purchasing a
new one. However, the possibility of successfully reselling the old mobile phone online
was very low. Without mentioning resale price, we inquired about participants’
willingness to purchase this new phone. Participants in the high resale awareness
condition were told to imagine that they were purchasing a new mobile phone and that it
was highly probable that they would be able to resell their old phone for a certain (high,
medium, or low) resale price. Setting three levels of resale price might have strengthened
the effect of resale consideration on purchase intention; in any case, it could be used to
further explore the correlation between resale price and purchase intention.
From a pretest, we determined the high, medium, and low resale prices for the high
resale awareness groups by surveying Youthwant members. A total of 80 respondents
were compensated with 30 virtual points each (, $NT30) for completing the pretest.
The pre-questionnaire showed the same picture of the mobile phone as used in the
main study and had a simple textual description of its functionality. It also showed a
brand new sale price of $10,000. Participants were asked: if someone buys this new
mobile phone, and after using it resells it in an online auction, what are the expected
 highest and lowest resale prices in the best and worst scenarios? Results showed an Consumer online
average high resale price of $7,311 and low price of $4,392. We then set $3,000 ($US93), resale awareness
$6,000 ($US187), and $9,000 ($US281) as the low, medium, and high resale prices. The
high resale price of $9,000 was greater than the average expected high resale price
($7,311), the medium resale price of $6,000 was between the average high and low
resale prices ($4,392), and the low resale price of $3,000 was less than the average low
resale price. We rounded values to the nearest whole number to make it easier for 1583
participants to use ratios to estimate the relative expensiveness or cheapness of prices.
Note also that all resale prices in this study represent buy-now prices, not bids.
The study employed four questionnaire versions, one for each of the four groups:
one low-awareness group and three high-awareness groups (each with a different set of
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

resale price). Participants in low resale awareness group completed a formal online
questionnaire that consisted of two sections:
(1) a description and photo of a new mobile phone and a hypothetical purchase
price of the phone (NT$10,000; and
(2) a statement that manipulated resale awareness (“When you were considering
whether to purchase the new mobile phone, you recalled a mobile phone now
idle at home. The chance to successfully resell this used phone in an online
auction was very low”) and questions aimed at measuring participants’
purchase intention for the new phone rated on a seven-point Likert scale (“Given
all the information, what is your intention to buy the new mobile phone?”).

Participants in the high resale awareness groups answered two additional sets of
questions: a priming manipulation about online resale awareness and resale price.
They saw:
.
a description and photo of a new mobile phone and a hypothetical purchase price
of the phone (identical to those in the low resale awareness group);
.
a statement that manipulated resale awareness and resale price (“When you were
considering whether to purchase the new mobile phone, you recalled a mobile
phone now idle at home. The chance to successfully resell this used phone in an
online auction is very high, and according to market information, the average
[low, medium, or high] resale price of this used phone is [$3,000, $6,000, or
$9,000], three different versions”);
.
questions that asked them to state the expected resale return from selling this
possessed phone (“Given all of the information, how much do you expect to
receive if you resell your used mobile phone?”) and the perceived purchase price
considering both the cost of the new phone and the estimated resale return of the
used one (“Given this information, including the possible resale return of the
used phone, how much do you think you would really pay for the new mobile
phone if you could successfully resell the used one?”); and
.
questions that measured purchase intention for the new phone rated on a
seven-point Likert scale (“Given all this information, how high is your intention
to buy the new mobile phone?”).

The experimental context was simple with no auction terms (e.g. “bidding” or
“reserved price”) in the questionnaires to allow participants with no C2C online trading
 EJM experience to easily understand the questions and relate them to the buying and
47,10 reselling context. The voluntary participants clicked on the advertisement to access the
questionnaire page. At this point, the system randomly assigned the participants to
one of the four groups. All participants answered only one version of questionnaire,
and repeated participation was not permitted. Once participants had completed the
questionnaire, they were blocked by membership ID and not able to read or answer any
1584 other version of the questionnaire. This rule was stated in the terms and conditions
participants were required to read before starting the study, which ensured that all of
questionnaires collected in this study came from different participants.
A total of 238 valid samples were obtained. Participants were 23 years old on
average; 121 (50.8 percent) were students (13.0 percent high school students and 37.8
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

percent undergraduate or graduate students) and 117 (49.2 percent) were non-students;
127 (53.4 percent) had online resale experience; and 197 (82.8 percent) had experience
purchasing items in an online auction.

Results
The results of the manipulation check revealed that all of the priming/framing stimuli
functioned as intended. In the low resale awareness group, only one participant (1.6
percent) indicated an awareness of a successful resale, whereas in the high resale
awareness groups, 179 participants (100 percent) indicated such awareness.
The descriptive statistics of all of the dependent variables for all study groups are
listed in Table I. A t-test conducted on purchase intention revealed a significant
difference between the low- and high-awareness groups (MLow versus M High ¼ 3:05
versus 4.42, t ¼ 26:06, p , 0:001), supporting H1.1 (high awareness leads to greater
purchase intention).
A one-way ANOVA conducted on purchase intention of the three high-awareness
groups yielded significant differences among the groups (F ¼ 25:99, p , 0:001). A
Scheffe post hoc test confirmed these results (MHigh versus MMediumversus M Low ¼
5:36 versus 4.34 versus 3.58, High . Medium . Low, p-values , 0.05). These analyses
support H1.2 (among consumers with high awareness, a higher resale price leads to
greater purchase intention).
To further assess the relationship for a potential mediating effect of estimated resale
return, we carried out a procedure developed by Baron and Kenny (1986), who reported
that the following criteria must be met to demonstrate a mediating effect:

Intention to Estimated resale Perceived

Number of purchase return payment
participants Mean SD Mean SD Mean SD

Low online resale awareness 59 3.05 1.46 N/A N/A N/A N/A
High online resale awareness 179 4.42 1.52 5,166.15 2,986.72 4,980.69 3,314.64
Low resale price 60 3.58 1.50 2,925.95 1,846.99 7,257.38 1,510.55
Medium resale price 61 4.34 1.09 5,122.20 1,853.36 5,208.69 2,870.16
Table I. High resale price 58 5.36 1.41 7,529.83 3,120.99 2,385.69 3,303.41
Descriptive statistics for
Study 1 Note: SD, standard deviation
 .
a significant correlation between the independent (in the present study, resale Consumer online
reference price) and dependent (purchase intention) variables; resale awareness
.
a significant correlation between the independent variable and the potential
mediator(estimated resale return);
.
a significant correlation between the potential mediator and the dependent
variable; and
1585
.
the independent variable becomes a non-significant predictor (full mediation) or
a less powerful predictor (partial mediation) of the dependent variable in an
equation where both the independent variable and the mediator are examined as
predictors of the dependent variable.
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

Based on these criteria, our results suggested that estimated resale return partially
mediates the effect of resale price on purchase intention, because all conditions of this
type of mediation effect were met. In the multiple regression analysis, b for the resale
price decreased from 0.48 to 0.33 but remained significant (p , 0:001), while b for the
estimated resale return (.24) also remained significant (p ¼ 0:005, , 0.01). Thus, H1.3
is partially supported.
To examine the possible mediating effect of perceived purchase payment, the
results of the regression analyses showed that, albeit all variables were significantly
correlated to each other, b for resale price remained significant (b ¼ 0:38, p , 0:001)
after we added perceived purchase payment to the equation, while b for perceived
purchase payment was insignificant (b ¼ 20:16, p . 0:05). The results failed to
support a significant mediating effect of perceived purchase payment between resale
price and purchase intention. H1.4 is not supported.

Discussion
We have shown that consumers’ awareness of the possibility of reselling a used
possession online can significantly influence their intention to purchase a new product
of the same type (e.g. selling a used mobile phone, buying a new mobile phone). We
have confirmed Chu and Liao’s (2007, 2008) proposals that awareness of online resale
opportunities and expectations of already owned goods is an important factor affecting
the decision to purchase new items.
We have also found that once consumers have developed online resale awareness,
their intention to purchase a new good is affected by the resale reference price of the
resold item. The higher the resale reference price, the more willing the consumers are to
buy a new item. These findings imply that a consumer’s intention to purchase a new
product is affected not only by the benefits of the product and his or her budget but
also the possibility that the usable older item can be sold online to minimize the sense
of waste (Chu and Liao, 2008). A buyer can mentally reduce the expense of a purchase
by combining his or her subjective evaluations of the purchase and resale potential of a
possessed item (Heath and Fennema, 1996; Thaler, 1985), and only when the resale
price is high enough can individuals cover a small loss with a larger gain to boost
purchase intention (Chu and Liao, 2010; Thaler, 1985).
However, we did not find that perceived purchase payment mediated the
relationship between resale price and purchase intention. It is possible that consumers
may not deduce the net purchase payment based only on the resale price, and/or that
the feeling of loss through the act of making a payment may not be offset by the
 EJM expected resale price. This indicates that consumers may have difficulty integrating
47,10 the resale price with the purchase cost. Nonetheless, estimated resale return partially
mediated the relationship between resale price and intention to purchase, which
somewhat supports the idea that consumers subjectively integrate mixed gains
(Thaler, 1985, 1999) to augment the perceived utility of a product or to justify its
purchase (Shafir et al., 1993). The main factor that increases purchase intention is the
1586 awareness of a higher net gain based on the estimated resale return, which may help
explain why perceived purchase payment did not have a mediating effect. Overall, the
evidence showed that the resale reference price is sufficient to predict purchase
intention. A greater possible resale reference price of a used product may be an
important feature for consumers in general (not just online consumers) to consider
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

when buying a new product, as long as they are aware of the product’s resale potential.
Respondents in the present study were not required to have online resale experience,
and there was no difference in purchase intention between participants with and
without resale experience (MWith experience versus M No experience ¼ 4:41 versus 4.42,
t ¼ 20:05, p ¼ 0:96).
Consumers may resell a variety of used goods that are not necessarily the same type
as the new products they are considering buying. Therefore, it is also important to
understand the mental accounting process as it relates to how consumers may convert
mental book values between products (the resold item and the desired new item) of
different budget types. Study 2 investigated such a scenario.

Study 2
Theoretical foundation and hypotheses
According to the fungibility hypothesis, any unit of money can be substituted for
another, and the source of income is irrelevant in terms of consumption. Thaler (1985)
proposed the idea of mental accounting to counter this classical economic theory,
which he did not consider to characterize consumer thinking completely. Consumers
label income according to how it is made (income source) and develop attitudes toward
how to use each source of funds (Shafir and Thaler, 2006). For example, lost money in a
casino may not be deemed a “loss” of money, and thus a weaker sense of loss/pain
(Thaler and Johnson, 1990); it is more difficult to spend money earned from overtime
work than unexpected income (Hodge and Mason, 1995); people are more likely to
immediately spend what they save from a surprise discount when shopping; and
consumers are more inclined to spend the money they save carefully by thoroughly
comparing and pricing products (Ha et al., 2006). In the mental budgeting concept
proposed by Heath and Soll (1996), consumers divide expenses into apparel,
transportation, entertainment and food, and experiments have shown that different
categories of mental budgets are non-fungible.
Consumption expenses require careful consideration to clearly classify products
into often vague mental budget types. However, consumers typically only use their
memories or lax budgeting concepts to manage their mental budgets, which may lead
to under- or over-spending in certain categories (Heath and Soll, 1996). If consumers
adjust the number of items they purchase due to, say, product discounts, this should
increase their overall consumption satisfaction. However, because consumers
subjectively believe that budget types are not fungible, overall consumption may
not be optimized (Heath and Soll, 1996).
 When consumers have the intention to buy a new item and are aware they have the Consumer online
same type of used item that could be resold, they naturally place both items in the same resale awareness
mental budgeting category. The income from reselling the old item is then considered
part of the funds that can be used to buy the new item, resulting in a relatively smaller
perceived burden of consumption and thus an increased purchase intention; this was
verified in Study 1. Study 2 considers how this scenario changes when the products
being bought and sold are not in the same product category but share a similar 1587
function and therefore could be categorized in a fungible mental account in terms of
budget planning.
Whether a resellable old product falls in a similar budget planning account of a
desired new product may be a key factor to determine if consumers create a fungible
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

mental budget for the products. If the two products are not in a similar mental budget
category, the resale potential of an old item may not enhance purchase intention of a
new item as the mental funds are not transferable between mental budget accounts.
Heath and Soll (1996) found that when an individual unexpectedly spends extra money
on tickets to a ball game, spending in the entertainment category automatically
decreases for monthly budget control, but other expenses are unaffected. This is
because the consumer clearly designates the tickets as part of the entertainment budget
in mental budgeting. However, if the extra expenses had been spent on food, this may
have affected a variety of expense categories, because food expenses may span many
budget categories, such as socializing and entertainment. Heath and Soll (1996)
discovered that when budget types are similar, there is greater fungibility. Thus, Study
2 theorizes that when the resale item and the item to be purchased are similar in terms
of mental budgeting, consumers will integrate them and will be more likely to create
fungible mental budgets for these products. The extent to which a resold old item and a
desired new item are similar should positively affect mental accounting fungibility,
which should in turn moderate the effect of resale awareness and resale price on
purchase intention. When there is low resale awareness, the intention to sell (and the
likelihood of selling) is low, and thus the different resale targets will not affect purchase
intention. Conversely, when there is high resale awareness, consumers will be more
inclined to purchase the new item when the resalable old item is an identical type of
product that is more fungible in terms of mental budgeting and thus makes the
purchase less burdensome. Thus, we propose the following:
H2.1. Prior to making a purchase, consumers with a greater awareness of the
possibility of reselling a possessed product that can be categorized into a
similar mental account as the one being purchased will have a greater
intention to buy the product than those with low resale awareness.
H2.2. When there is low resale awareness, whether the resale target is an identical
or distinct type of product will not significantly affect the intention to
purchase new items.
H2.3. When there is high resale awareness, the similarity in terms of mental
budgeting between a new and an old product will affect purchase intention,
such that identical types of products will be associated with higher purchase
intention than distinct types of products that nevertheless can be categorized
into a similar mental account.
 EJM Method
47,10 The purpose of Study 2 was to explore change in the intention to purchase new items
when consumers are aware that they possess different resalable old items that
nevertheless are in a similar mental budget category as those of the desired new items.
We used a pretest to determine resale target items that would be most likely to be
categorized with mobile phones in terms of mental accounting. We asked 98
1588 Youthwant participants, “How similar do you think the following items are in terms of
budget classification to mobile phones?”. Participants used a seven-point Likert scale
to rate the similarity of nine products (i.e. MP3 player, jeans, wristwatch, movie
coupon, sports shoes, electronic dictionary, digital camera, perfume, and laptop
computer). Digital camera had the highest mean score (5.42), indicating that it was
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

considered to be in a similar mental budgeting category as a mobile phone. Because

both digital cameras and mobile phones are electronic devices and are frequently
resold on the internet in Taiwan (Yam Survey, 2010), they were considered suitable for
testing differences in purchase intention due to the degree of mental budgeting
similarity of the resale target item.
Study 2 followed the same procedure as Study 1, but each participant was told to
imagine that he or she already owned a digital camera (as opposed to a mobile phone).
The same resale values ($3,000, $6,000, and $9,000) were applied to the camera in the
three high resale awareness groups (“When you were considering whether to purchase
the new mobile phone, you learned that a possessed digital camera now idles at home.
The chance to successfully resell this used camera in an online auction is very high,
and according to market information, the average [low, medium, or high] resale price of
this used camera is [$3,000, $6,000, or $9,000]”).
A total of 240 registered members of Youthwant were compensated with 30 virtual
points each (, $30). Participants were 23 years old on average; 36 (15.0 percent) were
high-school students, 74 (30.8 percent) were undergraduate or graduate students, and
130 (54.2 percent) were non-students; 134 (55.8 percent) had online resale experience;
and 192 (80.0 percent) had experience purchasing items from an online auction. None of
the Study 2 participants had participated in Study 1.

Results
The manipulation check results showed that all manipulations were as intended. In the
low resale awareness group, no participants reported to be aware of the possibility of a
successful resale. In the high resale awareness groups, 179 participants (98.9 percent)
indicated an awareness of the possibility of reselling the used digital camera.
A t-test conducted on intention to purchase yielded a significant difference between
the low- and high-awareness groups (MLow versus M High ¼ 3:00 versus 4.03,
t ¼ 24:95, p , 0:001). This result supports H2.1, that consumers with high online
resale awareness of a used digital camera will have a greater intent to purchase a new
mobile phone than those with low online resale awareness. Table II lists the descriptive
statistics of dependent variables for all experimental groups in Study 1 and Study 2.
The low-awareness group exhibited nearly the same degree of purchase intention as
in Study 1 (MPhone versus M Camera ¼ 3:05 versus 3.00, t ¼ 0:21, p ¼ 0:84), which
supports H2.2. For the high-awareness groups, the mobile phone (identical type of
product) in Study 1 elicited a higher purchase intention than the digital camera
 Consumer online
Intention to
Number of purchase resale awareness
Resale possibility Resale target participants Mean SD

Low resale awareness Resale of possessed phone

(Study 1) 59 3.05 1.46
Resale of possessed camera 1589
(Study 2) 59 3.00 1.23
High resale awareness Resale of possessed phone
(Study 1) 179 4.42 1.52
Resale of possessed camera
(Study 2) 181 4.03 1.44
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

High resale awareness (low resale price, Resale of possessed phone

$NT3,000) (Study 1) 60 3.58 1.50
Resale of possessed camera
(Study 2) 60 3.27 1.43
High resale awareness (medium resale Resale of possessed phone
price, $NT6,000) (Study 1) 61 4.34 1.09
Resale of possessed camera
(Study 2) 59 4.10 1.05
High resale awareness (high resale price, Resale of possessed phone
$NT9,000) (Study 1) 58 5.36 1.41
Resale of possessed camera
(Study 2) 62 4.71 1.44 Table II.
Descriptive statistics for
Note: SD, standard deviation Study 1 versus Study 2

(distinct type of product) in Study 2 (MPhone versus M Camera ¼ 4:42 versus 4.03,
t ¼ 2:47, p , 0:05). Thus, H2.3 was supported (see Figure 1).

Discussion
The results of Study 2 indicate that awareness of being able to resell a possessed good
(whether an identical or similar but distinct item) online can significantly influence a
consumer’s purchase intention. In the high resale price condition, when the resalable
old item was the same type as the desired new product, the influence of resale
awareness on purchase intention was greater than when the two items were different
types but in a similar mental budgeting category. This implies that, in terms of mental
accounting, different budget types entail different fungibility effects depending on
their similarity in terms of mental budgeting (Heath and Soll, 1996; Thaler, 1985).
These effects are reflected in the fact that the relationships between resale awareness
and purchase intention are moderated by the similarity between the resale item and the
desired new one.
Studies 1 and 2 focused on the unplanned resale of possessed items, but consumers
also use C2C online auctions when, before purchasing a desired item, they are already
planning to resell it (Chu and Liao, 2007). In such a planned resale, consumers’
awareness of future online resale potential can also influence their purchasing
decisions (Chu and Liao, 2010). Planned resale should involve different mental
accounting when the motivation to purchase an item involves not only obtaining the
product for personal use but also reselling it later for profit. Study 3 replicated Chu and
 EJM
47,10

1590
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

Figure 1.
Interaction effects of resale
awareness and resale price
in Study 1 and Study 2

Liao’s (2010) experiment in terms of a planned resale, and its results are compared with
those of Study 1 to better understand consumers’ mental accounting of online resale in
different contexts.

Study 3
Theoretical foundation and hypotheses
Study 3 centered on the fact that desired new products can be resold in the near future.
In this scenario, the purchased item is (will soon become) the resale item, and the resale
occurs shortly after the new product is purchased. Because the purchase and resale
items are the exact same product, the “income” the consumer will eventually get from
reselling could be deemed as the mental book value (Okada, 2001) equal to the cost of
purchasing the item deducting the depreciation with usage (Heath and Fennema, 1996).
Consumers with awareness of a planned resale may integrate the current purchasing
cost and future resale income to lower their discomfort with the expenses incurred from
the purchase (Chu and Liao, 2010). Compared to those with no resale awareness, when
people know that the item they want to buy has future resale value and that they may
gain cash back, they should have a higher purchase intention for the new item. They
may also feel that products of greater resalable value signal better quality and less
depreciation (Chu and Liao, 2010). Thus, we propose:
H3.1. Prior to a purchase, consumers who are highly aware of the possibility of
reselling a new good online shortly after acquiring it will have a greater
intention to buy the good than those with low online resale awareness.
 Although we expect this type of mental accounting to affect purchase intention, it Consumer online
should have a lesser influence than the case examined in Study 1. This is because items resale awareness
that have been idle for long are similar to sunk costs, and thus the money recouped
from resale is considered unexpected income, which consumers are more likely to
spend (Ha et al., 2006; Shafir and Thaler, 2006). Also, according to studies on trade-in
promotions, consumers are happy to add the remaining mental book value of used
possessions to new purchases for it avoids the sense of waste (Okada, 2001). In Study 1, 1591
selling idle possessions positively affects the desire to purchase new products, while
the participants in Study 3 will not have that option and thus may not present the same
level of effect. This should result in lower purchase intention compared to Study 1.
When there is low resale awareness, the intention to sell (and likelihood of selling) is
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

low, and thus the different resale targets will not affect purchase intention. Conversely,
when there is high resale awareness, consumers will be more inclined to sell old idle
items, view such income as unexpected income, and be more likely to spend it. These
lead to the following hypotheses:
H3.2. When there is low resale awareness, whether the resale target is the desired
new product or an old used one will not significantly affect the intention to
purchase new items.
H3.3. When there is high resale awareness, compared to the idea to resell a newly
acquired good, the resale of an old possession will lead to greater purchase
intention of a new item.

Method
Study 3 followed the same procedure as Studies 1 and 2, but each participant was told
to imagine that he or she plans to resell the desired new product (a mobile phone)
shortly after purchasing it in high resale awareness group. In this scenario, the
purchased item is exactly the resale item, and the resale occurs after the new product is
purchased. The same resale values ($3,000, $6,000, and $9,000) were applied to the
mobile phone in the three high resale awareness groups (“When you were considering
whether to purchase the new mobile phone, you planned to resell this phone after
purchasing it. The chance to successfully resell this phone in an online auction is very
high, and according to market information, the average [low, medium, or high] resale
price of this phone is [$3,000, $6,000, or $9,000]”). A total of 240 registered members of
Youthwant were compensated for participation with 30 virtual points each (, $30).
Participants were 25 years old on average; 29 (12.1 percent) were high-school students,
85 (35.4 percent) were undergraduate or graduate students, and 126 (52.5 percent) were
non-students; 141 (58.8 percent) had online resale experience; and 201 (83.8 percent) had
experience purchasing items in an online auction. None of the Study 3 participants had
participated in either Study 1 or Study 2.

Results
The results showed that all manipulations functioned as intended. When answering
the purchase intention question, 60 participants (100 percent) in the low resale
awareness group indicated that they were unaware of the possibility of reselling the
new mobile phone. In the high resale awareness groups, 180 participants (100 percent)
indicated such awareness.
 EJM According to a t-test conducted on purchase intention between the two resale
47,10 awareness groups, there was a significant difference between the low- and
high-awareness groups (MLow versus M High ¼ 3:38 versus 4.12, t ¼ 23:25, p , 0:001).
The result supports H3.1 (high awareness leads to greater purchase intention).
The descriptive statistics of the dependent variables for all experimental groups in
Studies 1 and 3 are listed in Table III, and the results of a two-way ANOVA (independent
1592 variables: resale awareness and new/used resale target; dependent variable: purchase
intention) are shown in Table IV. The interaction effect was significant (F ¼ 3:947,
p , 0:05), implying that resale planning and target (whether selling an old possession or
a new product) may moderate the effect of resale awareness on purchase intention.
Low-awareness participants exhibited almost the same degree of purchase intention
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

regardless of the resale target (MOld phone versus M New Phone ¼ 3:05 versus 3.38,
t ¼ 1:27, p ¼ 0:21), which supports hypothesis H3.2. However, high-awareness

Intention to
Number of purchase
Resale possibility Resale target participants Mean SD

Low resale awareness Resale of old phone

(Study 1) 59 3.05 1.46
Resale of new phone
(Study 3) 60 3.38 1.40
High resale awareness Resale of old phone
(Study 1) 179 4.42 1.52
Resale of new phone
(Study 3) 180 4.12 1.56
High resale awareness (low resale Resale of old phone
price, $NT3,000) (Study 1) 60 3.58 1.50
Resale of new phone
(Study 3) 60 3.52 1.52
High resale awareness (medium resale Resale of old phone
price, $NT6,000) (Study 1) 61 4.34 1.09
Resale of new phone
(Study 3) 60 4.23 1.33
High resale awareness (high resale Resale of old phone
price, $NT9,000) (Study 1) 58 5.36 1.41
Resale of new phone
Table III. (Study 3) 60 4.60 1.62
Descriptive statistics for
Study 1 versus Study 3 Note: SD, standard deviation

Source Mean square F

Resale awareness 0.02 0.01

Table IV. Resale target (new or old) 98.67 43.26 * * *
Summary of ANOVA test Resale awareness £ resale targets 9.00 3.95 *
results for Study 1 versus
Study 3 Note: *Significant at p , 0:05; * *significant at p , 0:01; * * *significant at p , 0:001
 participants in Study 3 with a resale plan had a significantly lower purchase intention Consumer online
than participants in Study 1 who resold without a plan (MOld phone versus M New Phone ¼
4:42 versus 4.12, t ¼ 1:86, p , 0:01). H3.3 is supported (see Figure 2).
resale awareness

Discussion
The results of Study 3 confirm Chu and Liao’s (2010) findings that in a planned resale
the awareness of being able to resell a desired new good online significantly influences 1593
consumers’ intention to purchase this new good. Having the opportunity to resell an
item prompts consumers’ awareness of and expectations for the possibility of a future
resale, and this in turn increases their intention to purchase the new item. Online resale
awareness is an important factor that affects both purchasing and reselling behavior.
This implies that product preference may be determined not only by personal taste and
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

product attributes but also by the opportunity and outcome of a future resale (Chu and
Liao, 2007, 2008, 2010).
A comparison of the results of Study 1 and Study 3 shows that consumers’
awareness of possessed item has a greater positive effect on their intention to purchase
the very same new item than does their awareness of a planned resale. Consumers tend
to apply money made from selling idle possessions to purchasing a new item more than
to purchasing an item for future resale. This implies that the return from selling idle
possessions is more similar to unexpected income (Ha et al., 2006; Shafir and Thaler,
2006) than income from reselling a new item yet to be purchased.

General discussion
This research investigated the mental accounting associated with buying a new
product given different levels of awareness of the possibility of reselling and buying
similar, different, or identical products.

Figure 2.
Interaction effects of resale
awareness and resale price
in Study 1 and Study 3
 EJM Our findings extend Chu and Liao’s (2010) findings by demonstrating that consumers
47,10 are concerned about the resale value of possessed items and will use the estimated
resale return to offset the cost of purchasing new products. Once their resale awareness
is triggered, consumers can connect the resale value of the old item to the purchase of
the new item, thereby increasing purchase intention. Disposing of old items can help
consumers avoid a sense of waste, which further legitimizes the purchase of new items
1594 (Okada, 2001). The windfall income from the resale profit also allows for further
purchases (Chu and Liao, 2008).
Consumers take mental note of resale income from different sources and form
different attitudes about how to use income from each source. The present studies
elucidate how resale awareness influences purchase intention to different degrees
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

depending on the resale target item (e.g. new or old, same or different product type in
the same mental budgeting category). The assumption of mental accounting
fungibility (Thaler, 1985) is sustained between consumers’ purchase and resale
budgeting accounts. When the resale item and the item to be purchased are similar in
terms of mental budgeting (Heath and Soll, 1996), consumers will integrate them and
use the resale return to offset the purchase cost. The extent to which a resold old item
and a desired new item are similar in terms of mental budgeting affects mental
accounting fungibility; identical items in an unplanned resale have the greatest effect.
In online auctions, people may act as consumers or resellers simultaneously or in
turn. The role of reseller is relatively new to consumers; this type of consumer
behavior, although important, has seldom been studied. We believe that the mental
accounting theory is well suited to explaining the purchasing and reselling behavior of
consumers in online auctions. When products can be easily resold online, they are
liquid assets. In online resale, consumers’ subjective estimations of product value shift
in complex ways, such that consumption cost, resale return, and the similarity in
mental budgeting between the resold and the desired new items all matter.

Managerial implications
We suggest that marketers keep in mind the changes brought by the online secondary
markets, in particular the potential link between these secondary markets and
consumer online selling and buying behaviors (Purohit, 1992). Although the
cannibalization effect predicts that the C2C online auction market will capture sales
from traditional marketers, online auction sites that enable consumers to resell goods
no longer in need may actually help increase sales of new products from marketers
(Paden and Stell, 2005). The results of the present three studies support this idea by
showing that consumers prefer to dispose of items in their homes and that this elevates
the purchase intention for new products.
Online resale awareness may influence consumers’ purchasing decisions in a
number of ways. Our studies show that consumers with an awareness of online resale
may more easily raise a need to purchase an item because they perceive a lower
purchase cost offset by recouping fund from an online resale; therefore in such a way,
more products and brands become psychologically affordable. Marketers that
advertise a product as having good secondary resale potential or that simply arouse
consumers’ resale awareness may increase purchase intention no matter how likely a
consumer is to engage in online resale in the future.
 If marketers intend to help consumers resell possessions or to simply elicit Consumer online
consumers’ resale awareness in order to boost sales of new products, they should resale awareness
consider promoting new items that are most similar to the consumers’ current items.
By the same token, marketers that offer a trade-in promotion should try to maximize
the similarity between new and traded items in terms of consumer mental budgeting.
Furthermore, consumers with high resale awareness may search for different
information and have more exacting preferences, especially for products with better 1595
resale potential and resale value. Consumers nowadays enjoy visiting and being a part
of social shopping websites, where resale information and product comments
generated by users influence purchase and resale decisions (Stephen and Toubia, 2010).
Therefore, offering after-sale services such as extended guarantees or maintenance
that facilitate future resale may increase consumers’ purchase intention. Marketers
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

should watch and manage consumers’ opinions online, as resale information and
product comments in C2C auctions continue to be important for business.

Limitations and future research

There are some limitations to the present study. First, the participants were all from a
single Taiwanese online community. More and a greater variety of participants
(e.g. both online and offline consumers, even those from traditional secondhand
markets) should be included in future studies to gain a better understanding of
consumer purchasing and resale behavior. Although our studies are relatively
theory-driven, the findings might be subject to cultural differences in the online resale
environment. Future studies could go beyond the cultural context studied here and
include a greater diversity of goods with different features, consumers with a range of
resale experience, and a variety of scenarios to verify the robustness of our findings
and improve the generalizability of the concepts. This is important because consumer
resale decisions may change according to product, the personality of the consumer, and
situational factors (Chu and Liao, 2008; Paden and Stell, 2005). Also, an empirical test
of fungibility effects among different mental accounts related to purchase and resale
through examining how consumers really allocate money will make significant
contribution to theory. Future studies can refine the simplified value function used in
this study by examining how individuals evaluate product benefit, cost and resale
return empirically. The function should consider more factors, such as expected value
of events, individual differences and product characteristics. The strengthened value
function will provide a clearer picture and more robust evidence in how consumers link
a resale to a purchase. Finally, given the important influence of resale reference price
on consumer online resale decisions, future studies should test and compare more
resale price levels and collect thoughts from consumers in terms of cognitive responses
to provide a more comprehensive understanding of underlying mechanisms of
consumer resale psychology.

References
Arkes, H.R. and Blumer, C. (1985), “The psychology of sunk cost”, Organizational Behavior and
Human Decision Processes, Vol. 35 No. 1, pp. 124-140.
Baron, R.M. and Kenny, D.A. (1986), “The moderator-mediator variable distinction in social
psychological research: conceptual, strategic, and statistical considerations”, Journal of
Personality and Social Psychology, Vol. 51 No. 6, pp. 1173-1182.
 EJM Chu, H. and Liao, S. (2007), “Exploring consumer resale behavior in C2C online auctions:
taxonomy and influences on consumer decisions”, Academy of Marketing Science Review,
47,10 Vol. 11 No. 3, pp. 1-27.
Chu, H. and Liao, S. (2008), “Toward a conceptual model of consumer online resale behavior: an
exploratory study in Taiwan”, Journal of Internet Commerce, Vol. 7 No. 2, pp. 220-252.
Chu, H. and Liao, S. (2010), “Buying while expecting to sell: the economic psychology of online
1596 resale”, Journal of Business Research, Vol. 63 Nos 9/10, pp. 1073-1078.
Ghose, A., Telang, R. and Krishnan, R. (2005), “Effect of electronic secondary markets on the
supply chain”, Journal of Management Information Systems, Vol. 22 No. 2, pp. 91-120.
Gourville, J.T. and Soman, D. (1998), “Payment depreciation: the behavioral effects of temporally
separating payments from consumption”, Journal of Consumer Research, Vol. 25 No. 2,
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

pp. 160-174.
Ha, H.H., Hyun, J.S. and Pae, J.H. (2006), “Consumers’ mental accounting in response to
unexpected price savings at the point of sale”, Marketing Intelligence & Planning, Vol. 24
No. 4, pp. 406-416.
Heath, C. and Soll, J.B. (1996), “Mental budgeting and consumer decisions”, Journal of Consumer
Research, Vol. 23 No. 1, pp. 40-52.
Heath, C. and Fennema, M.G. (1996), “Mental depreciation and marginal decision making”,
Organizational Behavior and Human Decision Processes, Vol. 68 No. 2, pp. 95-108.
Herrmann, G.M. (1997), “Gift or commodity: what changes hands in the US garage sale?”,
American Ethnologist, Vol. 24 No. 4, pp. 910-930.
Herrmann, G.M. (2006), “Garage sale makes food neighbors: building community through
neighborhood sales”, Human Organization, Vol. 5 No. 2, pp. 181-191.
Herrmann, G.M. and Soiffer, S.M. (1984), “For fun and profit: an analysis of the American garage
sale”, Urban Life, Vol. 12 No. 4, pp. 397-421.
Hodge, S.K. and Mason, C.H. (1995), “Work versus windfall: an exploration of saving on
subsequent purchase”, Marketing Letters, Vol. 6, pp. 91-100.
Kahneman, D. and Tversky, A. (1979), “Prospect theory: an analysis of decision under risk”,
Econometrica, Vol. 47 No. 2, pp. 263-291.
Kahneman, D. and Tversky, A. (1983), “Choices, value, and frames”, American Psychology, Vol. 39
No. 4, pp. 341-350.
Kim, H.M. (2006), “The effect of salience on mental accounting: how integration versus
segregation of payment influences purchase decisions”, Journal of Behavioral Decision
Making, Vol. 19 No. 4, pp. 381-391.
McCrohan, K.F., Smith, J.D. and Adams, T.K. (1991), “The cyclical nature of household purchases
in informal markets”, European Journal of Marketing, Vol. 25 No. 7, pp. 22-40.
Okada, E.M. (2001), “Trade-ins, mental accounting, and product replacement decisions”, Journal
of Consumer Research, Vol. 27 No. 4, pp. 433-446.
Paden, N. and Stell, R. (2005), “Consumer product redistribution: disposition decisions and
channel options”, Journal of Marketing Channels, Vol. 12 No. 3, pp. 105-123.
Purohit, D. (1992), “Exploring the relationship between the markets for new and used durable
goods: the case of automobiles”, Marketing Science, Vol. 11 No. 2, pp. 154-167.
Shafir, E. and Thaler, R.H. (2006), “Invest now, drink later, and spend never: on the mental
accounting of delayed consumption”, Journal of Economic Psychology, Vol. 27 No. 5,
pp. 694-712.
 Shafir, E., Simonson, I. and Tversky, A. (1993), “Reason-based choice”, Cognition, Vol. 49 Nos 1/2, Consumer online
pp. 11-36.
Stephen, A.T. and Toubia, O. (2010), “Deriving value from social commerce networks”, Journal of
resale awareness
Marketing Research, Vol. 42 No. 2, pp. 215-228.
Thaler, R. (1980), “Towards a positive theory of consumer choice”, Journal of Economic Behavior
and Organization, Vol. 1 No. 1, pp. 39-60.
Thaler, R. (1985), “Mental accounting and consumer choice”, Marketing Science, Vol. 4 No. 3, 1597
pp. 199-214.
Thaler, R. (1999), “Mental accounting matters”, Journal of Behavioral Decision Making, Vol. 12
No. 3, pp. 183-206.
Thaler, R. and Johnson, E.J. (1990), “Gambling with the house money and trying to break even:
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)

the effects of prior outcomes on risky choice”, Management Science, Vol. 36 No. 6,
pp. 643-660.
Yam Survey (2010), available at: http://taiwan.yam.org.tw/survey/.

Corresponding author
Hsunchi Chu can be contacted at: s939606@gmail.com

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints
 This article has been cited by:

1. Yusheng Hu, Jinlin Li, Lun Ran. 2015. Dynamic Pricing for Airline Revenue Management under
Passenger Mental Accounting. Mathematical Problems in Engineering 2015, 1-8. [CrossRef]
Downloaded by University of Pennsylvania Libraries At 14:19 31 January 2016 (PT)