Choice experiments are not conducted in a vacuum: The effects of external price information on choice behavior

Vincenzina Caputo, Jayson L. Lusk, Rodolfo M. Nayga, Jr

Research output: Contribution to journalArticle

7 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)335-351
Number of pages17
JournalJournal of Economic Behavior and Organization
Volume145
DOIs
Publication statusPublished - 2018 Jan 1
Externally publishedYes

Keywords

  • Discrete choice experiments
  • External price information
  • Food choice behavior
  • Reference price
  • Reference price uncertainty

ASJC Scopus subject areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management

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