Cornell University

Behavioral Economics Workshop: Jason Somerville

Thursday, December 12, 2019 at 11:40am to 1:10pm

Uris Hall, 498
Central Campus

Jason Somerville - Cornell University

Choice-Set-Dependent Preferences in Consumer Choice: An Experimental Test

Abstract:  This paper investigates whether the composition of a choice set alters the relative importance of different attributes. I derive the distinguishing predictions of several leading models of choice-set-dependent preferences, including the focusing model of Koszegi and Szeidl (2013), the salience theory of Bordalo, Gennaioli, and Shleifer (2013), and the relative thinking model of Bushong, Rabin, and Schwartzstein (2019). I test these predictions in a laboratory experiment in which I vary the prices of high- and low-quality variants of multiple products. The data provide clear evidence of choice-set dependence: price increases that expand the range of prices in the choice set lead to more purchases; increasing prices while holding fixed price differences induces substitution to higher-quality options. Structural estimates imply that most participants exhibit choice-set dependence consistent with Bushong, Rabin, and Schwartzstein (2019), albeit with substantial heterogeneity in the intensity of the effect.

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Event Type

Class/ Workshop

Departments

Economics

Tags

economics, EconSeminar, EconBehave

Hashtag

#CornellEcon

Contact E-Mail

uab1@cornell.edu

Contact Name

Ulrike Kroeller

Contact Phone

6072554254

Speaker

Jason Somerville

Speaker Affiliation

Cornell University

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