Range-Dependent Attribute Weighting in Consumer Choice: An Experimental Test
Econometrica · 2022 · Volume 90 · Issue 2
Abstract
This paper investigates whether the range of an attribute's outcomes in the choice set alters its relative importance. I derive distinguishing predictions of two prominent theories of range-dependent attribute weighting: the focusing model of Kőszegi and Szeidl (2013) and the relative thinking model of Bushong, Rabin, and Schwartzstein (2021). I test these predictions in a laboratory experiment in which I vary the prices of high- and low-quality variants of multiple products. The data provide clear evidence of choice-set dependence consistent with relative thinking: price increases that expand the range of prices in the choice set lead tomorepurchases. Structural estimates imply economically meaningful effect sizes: the average participant was willing to pay around 17% more when a seemingly irrelevant option is added to their choice set.
Keywords
Choice-set dependence, focusing, relative thinking, range weighting
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