Demand shifts due to salience effects: experimental evidence

Markus Dertwinkel-Kalt, Katrin Koehler, Mirjam Lange, Tobias Wenzel

Research output: Contribution to journalArticle

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Abstract

We conduct a laboratory experiment that tests two fundamental predictions unique to salience theory. If an agent purchases one of two vertically differentiated products, salience theory makes the following two distinct predictions. First, it hypothesizes that a higher expected price level for both products shifts demand toward the more expensive, high-quality product. Second, it predicts that demand for the high-quality product is larger if the p rice level is expectedly high than if it is unexpectedly high. In our experiment, subjects purchased fast or slow Internet access at different price levels. Our results strongly support both predictions of salience theory.
Original languageEnglish
Pages (from-to)626-653
Number of pages28
JournalJournal of the European Economic Association
Volume15
Issue number3
Early online date13 Feb 2017
DOIs
Publication statusPublished - 31 Jul 2017

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