TY - JOUR
T1 - Choice experiments are not conducted in a vacuum
T2 - The effects of external price information on choice behavior
AU - Caputo, Vincenzina
AU - Lusk, Jayson L.
AU - Nayga, Rodolfo M.
N1 - Funding Information:
This work was partially supported by the USDA National Institute of Food and Agriculture, [Hatch] project [1013332].
Publisher Copyright:
© 2017 Elsevier B.V.
PY - 2018/1
Y1 - 2018/1
N2 - 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.
AB - 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.
KW - Discrete choice experiments
KW - External price information
KW - Food choice behavior
KW - Reference price
KW - Reference price uncertainty
UR - http://www.scopus.com/inward/record.url?scp=85037617556&partnerID=8YFLogxK
U2 - 10.1016/j.jebo.2017.11.018
DO - 10.1016/j.jebo.2017.11.018
M3 - Article
AN - SCOPUS:85037617556
SN - 0167-2681
VL - 145
SP - 335
EP - 351
JO - Journal of Economic Behavior and Organization
JF - Journal of Economic Behavior and Organization
ER -