Coherent Arbitrariness: Duration-Sensitive Pricing of Hedonic Stimuli Around an Arbitrary Anchor
39 Pages Posted: 21 Sep 2000
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: Suggested Citation