Money Muddles Thinking: The Effect of Price on Preference Consistency
Coauthor(s): Marco Bertini, Dan Ariely.
In this research we examine the possible role of price in degrading decision quality. We argue that the hedonic representation of money is ill-defined in the minds of consumers, which in turn makes utility judgments based on price difficult and preferences less consistent when price is an attribute in choice. The results of five experiments involving sequential pairwise choices from a set of ten t-shirts provide convergent support for this hypothesis. In addition, the effect is robust to different preference elicitation methods, persists even when participants are asked to simply consider how much a product might cost, yet is attenuated when price is replaced with a different numeric attribute of similar magnitude (e.g., quality ratings) or when people think about opportunity cost in a precise manner.
Source: Working Paper
Lee, Leonard, Marco Bertini, and Dan Ariely. "Money Muddles Thinking: The Effect of Price on Preference Consistency." Working Paper, Columbia University, 2008.