The Compromise Effect in Action: Lessons from a Restaurant's Menu

36 Pages Posted: 18 Jan 2016

See all articles by Pia R. Pinger

Pia R. Pinger

University of Bonn

Isabel Ruhmer

University of Mannheim - Center for Doctoral Studies in Economics and Management (CDSEM)

Heiner Schumacher

KU Leuven - Faculty of Business and Economics (FEB)

Abstract

The compromise effect refers to individuals' tendency to choose intermediate options. Its existence has been demonstrated in a large number of hypothetical choice experiments. This paper uses field data from a specialties restaurant to investigate the existence and strength of the compromise effect in a natural environment. Despite the presence of many factors that potentially weaken the compromise effect (e.g., a very large choice set, the opportunity to choose familiar options), we find evidence for it both in descriptive statistics and regression analyses. Options which become a compromise after a change in the choice set gain on average five percent in market share. We also find that the compromise effect is especially pronounced in groups, while for single customers it is statistically insignificant.

Keywords: utility theory, restaurant data, compromise effect

JEL Classification: D03, M31

Suggested Citation

Pinger, Pia R. and Ruhmer, Isabel and Schumacher, Heiner, The Compromise Effect in Action: Lessons from a Restaurant's Menu. IZA Discussion Paper No. 9648. Available at SSRN: https://ssrn.com/abstract=2716589

Pia R. Pinger (Contact Author)

University of Bonn ( email )

Isabel Ruhmer

University of Mannheim - Center for Doctoral Studies in Economics and Management (CDSEM) ( email )

Mannheim, D-68131
Germany

Heiner Schumacher

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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