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Demand shifts due to salience effects: Experimental evidence

Author

Listed:
  • Dertwinkel-Kalt, Markus
  • Köhler, Katrin
  • Lange, Mirjam R. J.
  • Wenzel, Tobias
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 price 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.

Suggested Citation

  • Dertwinkel-Kalt, Markus & Köhler, Katrin & Lange, Mirjam R. J. & Wenzel, Tobias, 2016. "Demand shifts due to salience effects: Experimental evidence," DICE Discussion Papers 216, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:216
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    References listed on IDEAS

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    More about this item

    Keywords

    salience theory; attention; relative thinking;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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