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Reservation price uncertainty: Loss, virtue, or emotional heterogeneity?

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  • Otto, Philipp E.
  • Schmidt, Lennard

Abstract

One of the best-researched anomalies in behavioral sciences is loss aversion, but with strong study variations and no systematic explanations thereof. The aim here was to introduce psychophysiological correlates for loss aversion to improve behavioral predictability. In an endowment experiment, a loss versus gain framing was implemented for a virtue versus a vice product. In addition to the classical price elicitation, an area of indifference and individual price reactions were examined, while emotional arousal as skin conductance levels were continuously measured. Furthermore, various heterogeneity measures for emotions and product experience evaluations were applied directly after the purchasing decision or as a more general personality measure at the end of the study. Results show fundamental regularities of product and frame on the price or the size of indifference. Physiologically measured emotional arousal further supports the dependence of loss aversion. Vice products and a loss frame increase emotional arousal and the consumer purchase price indifference. Reported emotions, aggregated as personality factors, can partially explain the observed heterogeneity in purchase price levels and price indifferences.

Suggested Citation

  • Otto, Philipp E. & Schmidt, Lennard, 2021. "Reservation price uncertainty: Loss, virtue, or emotional heterogeneity?," Journal of Economic Psychology, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:joepsy:v:87:y:2021:i:c:s0167487021000660
    DOI: 10.1016/j.joep.2021.102435
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    More about this item

    Keywords

    Psychophysiology; Skin conductance; Emotional branding; Choice uncertainty; Inconsistency measures;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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