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Theory and Decision

, Volume 76, Issue 1, pp 1–7 | Cite as

Common consequence effects in pricing and choice

  • Ulrich Schmidt
  • Stefan T. Trautmann
Article

Abstract

This paper presents an experimental study of common consequence effects in binary choice, willingness-to-pay (WTP) elicitation, and willingness-to-accept (WTA) elicitation. We find strong evidence in favor of the fanning out hypothesis (Machina, Econometrica 50:277–323, 1982) for both WTP and WTA. In contrast, the choice data do not show a clear pattern of violations in the absence of certainty effects. Our results underline the relevance of differences between pricing and choice tasks, and their implications for models of decision making under risk.

Keywords

Common consequence effects Fanning out WTP WTA Cancelation 

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Kiel Institute for the World EconomyUniversity of KielKielGermany
  2. 2.CentER, Department of EconomicsTilburg UniversityTilburgThe Netherlands

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