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Bargains or Rip-offs? Reference Price Effects in Conjoint Stated Demand

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  • Hu, Wuyang

Abstract

This study incorporates reference point effects into a stated choice survey of consumer demand for food with credence attributes. Parametric tests can be applied to the utility function to examine the existence of reference price effects. Results are consistent with prospect theory in that consumers exhibit strong and nonlinear reference price effects, with cheaper prices receiving less decision weight than higher prices. The underlying utility function is concave over lowered prices and convex over increased prices, with diminishing sensitivity in both domains. The study, however, did not find experience or consumers' attitudes to be significant in explaining reference price effects.

Suggested Citation

  • Hu, Wuyang, 2007. "Bargains or Rip-offs? Reference Price Effects in Conjoint Stated Demand," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 32(02), August.
  • Handle: RePEc:ags:jlaare:8639
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    File URL: http://purl.umn.edu/8639
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    Cited by:

    1. Peschel, Anne O. & Grebitus, Carola & Colson, Gregory & Hu, Wuyang, 2016. "Explaining the use of attribute cut-off values in decision making by means of involvement," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 65(C), pages 58-66.

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