Coherent Arbitrariness: Duration-Sensitive Pricing of Hedonic Stimuli Around an Arbitrary Anchor

39 Pages Posted: 21 Sep 2000

See all articles by Dan Ariely

Dan Ariely

Duke University - Fuqua School of Business

George Loewenstein

Carnegie Mellon University - Department of Social and Decision Sciences

Drazen Prelec

Massachusetts Institute of Technology (MIT) - Sloan School of Management; MIT Department of Economics; MIT Brain and Cognitive Sciences

Abstract

In three experiments, subjects stated their willingness to accept pain ? from listening to annoying sounds ? in exchange for payment (WTA). Subjects were presented with annoying sounds of different durations, indicated their WTA, and received the sounds and payment that resulted from their prices. At the onset of each experiment subject were asked to listen to the sound. Since the sound was very simple, from that point subjects had full information about the hedonic experience. After the initial exposure subjects were asked to state whether, hypothetically, they would be willing to listen to the noise for 30 seconds for either a large or small payment. Subsequently, their actual WTA was elicited to listen to the noise for different intervals (10, 30 and 60 seconds in the first experiment). WTA values exhibited a pattern that we label "coherent arbitrariness." Suggestive of coherence, prices were systematically related to noise duration. But, suggestive of arbitrariness, prices were powerfully influenced by the arbitrary high/low anchor accompanying the hypothetical question. The first study documented the effect at the individual level, the second in experimental markets, and the third examined more deeply the effect of the initial anchor.

JEL Classification: D11, D12

Suggested Citation

Ariely, Dan and Loewenstein, George F. and Prelec, Drazen, Coherent Arbitrariness: Duration-Sensitive Pricing of Hedonic Stimuli Around an Arbitrary Anchor. Available at SSRN: https://ssrn.com/abstract=243109 or http://dx.doi.org/10.2139/ssrn.243109

Dan Ariely (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
(919) 381-4366 (Phone)

George F. Loewenstein

Carnegie Mellon University - Department of Social and Decision Sciences ( email )

Pittsburgh, PA 15213-3890
United States
412-268-8787 (Phone)
412-268-6938 (Fax)

Drazen Prelec

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E40-161
MIT
Cambridge, MA 02142
United States
617-253-2833 (Phone)

MIT Department of Economics ( email )

Department of Economics
E52-371
Cambridge, MA 02142
United States

MIT Brain and Cognitive Sciences ( email )

43 Vassar Street
Cambridge, MA 02139
United States

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