Experimental Design Details
Problem: Imagine you are visiting New York City during the Christmas break. As
last item on your agenda before flying back home, you have saved the panorama view
from the Rockefeller Center:
Treatment condition:
L_b: d_b days free entrance for p_b $
L_l: d_l days free entrance for p_l $
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Control condition:
L_b': d_b'<d_b days free entrance for p_b $
L_l: d_l days free entrance for p_l $
We conjecture that a preference reversal (PR) is limited to cases that deal
with marginal utility differences of the choice alternatives. These marginal
utility differences derive from minimal price differences of the alternatives and
more importantly from an overall low likelihood to use the service again within
the subscribed time. More specifically, based on the defining properties of salience theory (Bordalo et al., 2012) we conjecture that, depending on the perceived probability of service use under the specific context of the question, a PR can occur given the following price condition, typically not otherwise:
p_l/p_b - p_b/p_l < 1, (respectively p_l/p_b < √2)
Based on the idea of pigeonholing - the influential role of the short subscription
on the perceived utility in a subscription set evaluation - let us define the
attraction (L_b|L_l) = (d_b, d_l, p_b, p_l) for the short subscription L_b relative to
L_l, expressed in share of preferences, along four properties:
1. Diminishing relative price attraction: ceteris paribus, then for any e > 1
(d_b, d_l, p_b · e, p_l · e) < (d_b, d_l, p_b, p_l)
2. Reinforcing absolute price attraction: cet par, then for any e > 0
(d_b, d_l, p_b + e, p_l + e) > (d_b, d_l, p_b, p_l)
3. Diminishing relative duration attraction: cet par, then for any e > 1
(d_b · e, d_l · e, p_b, p_l) < (d_b, d_l, p_b, p_l)
4. Diminishing absolute duration attraction: cet par, then for any e > 0
(d_b + e, d_l + e, p_b, p_l) < (d_b, d_l, p_b, p_l)