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Choice experiments are not conducted in a vacuum: The effects of external price information on choice behavior
- Source :
- Journal of Economic Behavior & Organization. 145:335-351
- Publication Year :
- 2018
- Publisher :
- Elsevier BV, 2018.
-
Abstract
- Consumers carry a wealth of external knowledge and experience into a study that may affect choices in even the most well-crafted experiment. We derive a conceptual model showing how the level and variability of price perceptions “outside” the task at hand might affect choice behavior, and we conduct an experiment to test the model by manipulating information provided to respondents in a way to alter the “outside the experiment” perceptions. Mixed logit, error component models show that reference-dependent models best describe the choice data, and we find that consumer choice is significantly affected by the experiment manipulations. The predictions of the model are borne out in the data. As expected, price sensitivity is generally higher for price changes above a price reference point than below. Also as predicted, exogenously increasing external reference prices and exogenously reducing the variability in references prices both serve to increase the probability of making a purchase and reduce the probability of choosing “none.” These results have important implications for the design and practice of choice experiments, as they show that consumer choice is affected by perceptions of the level and variability of prices outside the experiment. More generally, the results highlight the need to understand the formation and distribution of reference prices when predicting consumer choice.
- Subjects :
- Organizational Behavior and Human Resource Management
Economics and Econometrics
business.industry
media_common.quotation_subject
Consumer choice
05 social sciences
Reference price
Distribution (economics)
Affect (psychology)
Microeconomics
External reference
Mixed logit
Perception
0502 economics and business
Conceptual model
Economics
050211 marketing
050202 agricultural economics & policy
business
media_common
Subjects
Details
- ISSN :
- 01672681
- Volume :
- 145
- Database :
- OpenAIRE
- Journal :
- Journal of Economic Behavior & Organization
- Accession number :
- edsair.doi...........08401f84d8669720efb6144c7aeedf3c