| By: |
Holger Müller (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg);
Eike Benjamin Kroll (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg);
Bodo Vogt (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg) |
| Abstract: |
In this paper, the preference reversal phenomenon known from risk research is
investigated according to which subjects prefer gamble A over B in competitive
decisions although they reveal higher valuations in terms of a cash equivalent
(CE) or a willingness to pay (WTP) for the latter when gambles are assessed
separately in monadic judgments. In contrast to the experimental settings of
research on risky choices, our studies observed unforced and binding purchase
decisions of experienced consumers between real products in natural shopping
environments. Results confirm robustness of preference reversals in risk-free
purchase decisions indicating that orderings of product preferences reverse
significantly between evaluations in monadic and competitive designs. While
recent pricing research has been largely focused on monadic designs and
suggested BDM mechanisms or second-price auctions for elicitations of
consumers’ true willingness to pay, results of our studies indicate a
substantial discrepancy between preference orders based on monadic judgments
and preferences that consumers reveal in competitive purchase decisions. |
| Keywords: |
Preference Reversals, Willingness to Pay, Monadic Designs, Competitive Designs, Pricing Research, Procedure Invariance |
| Date: |
2010–01 |
| URL: |
http://d.repec.org/n?u=RePEc:mag:wpaper:100003&r=dcm |