Public and private values
This paper experimentally examines whether looking at other people's pricing decisions is a type of heuristic - a decisionmaking rule - that people use even when it is not applicable, as in the case of clearly private value goods. We find evidence that this is indeed the case - an individual's valuation of a purely subjective experience under full information, elicited using an incentive compatible mechanism, is highly influence by valuations made by others. This result can shed light on price behavior, price rigidities, and rents.
|Date of creation:||2010|
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- Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992.
"A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades,"
Journal of Political Economy,
University of Chicago Press, vol. 100(5), pages 992-1026, October.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
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