Download This PaperRange-Dependent Attribute Weighting in Consumer Choice: An Experimental Test
46 Pages Posted: 8 Jun 2020 Last revised: 3 Aug 2021
Date Written: August 1, 2021
Abstract
This paper investigates whether the range of an attribute’s outcomes in the choice set alters its relative importance. I derive distinguishing predictions of two prominent theories of range-dependent attribute weighting: the focusing model of Koszegi and Szeidl (2013) and the relative thinking model of Bushong, Rabin, and Schwartzstein (2021). 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 consistent with relative thinking: price increases that expand the range of prices in the choice set lead to more purchases. Structural estimates imply economically meaningful effect sizes: the average participant was willing to pay around 17% more when a seemingly irrelevant option is added to their choice set.
Keywords: Choice-Set-Dependent Preferences; Relative Thinking; Focusing; Salience Theory; Structural Behavioral Economics
JEL Classification: D90
Suggested Citation: Suggested Citation
Jason Somerville (Contact Author)
Federal Reserve Banks - Federal Reserve Bank of New York ( email )
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