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Experimental evidence of context-dependent preferences in risk-free settings

Author

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  • Kroll, Eike Benjamin
  • Müller, Holger
  • Vogt, Bodo

Abstract

This study investigates context effects in general and the compromise effect in particular. It is argued that earlier research in this area lacks realism, a shortcoming that is a major drawback to research conclusions and stated management implications. The importance of this issue is stressed by previous research showing that behavioral anomalies found in hypothetical experimental settings tend to be significantly reduced when real payoff mechanisms are introduced. Therefore, to validate the compromise effect, an enhanced design is presented with participants making binding purchase decisions in the laboratory. We find that the compromise effect holds for real purchase decisions, and therefore is validated, and is not an artificial effect in surveys on hypothetical buying decisions. While conclusions and implications for marketing managers, derived in previous work assume that context effects hold for real market decisions, the results created by this enhanced design close this gap in the literature.

Suggested Citation

  • Kroll, Eike Benjamin & Müller, Holger & Vogt, Bodo, 2010. "Experimental evidence of context-dependent preferences in risk-free settings," Working Paper Series in Economics 12, Karlsruhe Institute of Technology (KIT), Department of Economics and Business Engineering.
  • Handle: RePEc:zbw:kitwps:12
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    More about this item

    Keywords

    decision-making; anomalies; irrelevant alternatives; context effects;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments

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