Manipulating perception: The effect of product similarity on valuations and markets
Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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Manipulating perception: The effect of product similarity on valuations and markets. / Gotfredsen, Andreas; Nielsen, Carsten Søren; Sebald, Alexander Christopher; Webb, Edward John Dorrell.
I: Journal of Economic Behavior & Organization, Bind 190, 10.2021, s. 263-286.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - Manipulating perception: The effect of product similarity on valuations and markets
AU - Gotfredsen, Andreas
AU - Nielsen, Carsten Søren
AU - Sebald, Alexander Christopher
AU - Webb, Edward John Dorrell
PY - 2021/10
Y1 - 2021/10
N2 - We study the economic impact of perceptual limitations using experimental goods for which the difficulty of perceiving the difference between them can be manipulated by altering the similarity of their visual representation. In our first experiment, we found that subjects’ willingness-to-pay for goods became more similar when it was harder to discriminate between them. Building on this result, we ran a second experiment where the same experimental goods were traded in a market with heterogeneous buyer preferences and seller market power. Buyers were less likely to choose the option which maximises consumer surplus when discriminating between products was harder, and buyer payoffs were lower. We find indications that buyers used a different method of constructing their valuations in the market than in individual choice, and there was weak evidence that using different methods were beneficial for buyers. Seller prices and profits were not dependent on how easy it was for buyers to discriminate between goods.
AB - We study the economic impact of perceptual limitations using experimental goods for which the difficulty of perceiving the difference between them can be manipulated by altering the similarity of their visual representation. In our first experiment, we found that subjects’ willingness-to-pay for goods became more similar when it was harder to discriminate between them. Building on this result, we ran a second experiment where the same experimental goods were traded in a market with heterogeneous buyer preferences and seller market power. Buyers were less likely to choose the option which maximises consumer surplus when discriminating between products was harder, and buyer payoffs were lower. We find indications that buyers used a different method of constructing their valuations in the market than in individual choice, and there was weak evidence that using different methods were beneficial for buyers. Seller prices and profits were not dependent on how easy it was for buyers to discriminate between goods.
KW - Faculty of Social Sciences
KW - perception
KW - similarity
KW - bounded rationality
KW - willingness-to-pay
KW - posted offer market
KW - Experimental economics
U2 - 10.1016/j.jebo.2021.07.007
DO - 10.1016/j.jebo.2021.07.007
M3 - Journal article
VL - 190
SP - 263
EP - 286
JO - Journal of Economic Behavior & Organization
JF - Journal of Economic Behavior & Organization
SN - 0167-2681
ER -
ID: 281599786