On subscription traps and preference reversals: The pigeonholing hypothesis

Last registered on August 05, 2020

Pre-Trial

Trial Information

General Information

Title
On subscription traps and preference reversals: The pigeonholing hypothesis
RCT ID
AEARCTR-0006262
Initial registration date
August 04, 2020

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
August 05, 2020, 10:10 AM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Region

Primary Investigator

Affiliation
University of Amsterdam, Ca' Foscari University of Venice

Other Primary Investigator(s)

Additional Trial Information

Status
In development
Start date
2020-08-04
End date
2020-08-31
Secondary IDs
Abstract
A first pilot study finds that when the choice menu of a service provider includes a single-use subscription, it is frequently preferred over a costlier, long-term alternative. Once single-use is replaced by an extended option for the same price, fewer subjects favor it. We conjecture that single-use in the former choice set appeals to a rather rational evaluation, while in the latter comparison the alternatives are decoded along the same category - referred to pigeonholing - with the consequence that other salient comparative criteria come to the fore and fade rational evaluation into the background. A two-dimensional framework present in most behavioral models fails to explain this type of preference reversal. Based on the conception of transaction utility (Thaler, 1985) we propose a generalization of salience theory (Bordalo, Gennaioli, and Shleifer, 2012) able to capture the effect of pigeonholing.
External Link(s)

Registration Citation

Citation
Neunhoeffer, Frieder. 2020. "On subscription traps and preference reversals: The pigeonholing hypothesis." AEA RCT Registry. August 05. https://doi.org/10.1257/rct.6262
Experimental Details

Interventions

Intervention(s)
Intervention Start Date
2020-08-04
Intervention End Date
2020-08-31

Primary Outcomes

Primary Outcomes (end points)
share of preferences respectively for the short and the long subscription in each condition
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
We ask subjects about their preferences regarding two different subscriptions, that differ in price and length, in a between-subject design.
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 $
——————————————————————————————————————
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)
Randomization Method
Study participants are recruited via the subject pool of the CREED
laboratory at the University of Amsterdam (randomized through the in-house experiment registration system), and the crowdfunding platform
Prolific, which is specifically targeted to randomized online surveys and experiments.
Randomization Unit
individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
no cluster design
Sample size: planned number of observations
200 individuals
Sample size (or number of clusters) by treatment arms
30 individuals per treatment
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number

Post-Trial

Post Trial Information

Study Withdrawal

There are documents in this trial unavailable to the public. Use the button below to request access to this information.

Request Information

Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials